<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


 (Mark one)

 (X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934


For quarterly period ending                September 30, 2000
                            ----------------------------------------------------

                                       or

 ( )  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the transition period from                      to
                               --------------------    -------------------------

Commission file number:          0-30791
                        ------------------------


                               eFUNDS CORPORATION
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

             DELAWARE                                    39-1506286
----------------------------------------     -----------------------------------
(State or other jurisdiction of               (IRS Employer Identification No.)
incorporation or organization)

7272 East Indian School Road, Suite 420,                   85251
        Scottsdale, Arizona
----------------------------------------     -----------------------------------
(Address of principal executive offices)                 (Zip Code)


                                 (602) 659-2135
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
                                     Yes  X     No
                                        -----     -----

The number of shares outstanding of the registrant's common stock, par value
$0.01 per share, at October 31, 2000 was 45,500,000.
<PAGE>

                          PART I. FINANCIAL INFORMATION

Item 1: Financial Statements
----------------------------

                       eFUNDS CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                       December 31, 1999   September 30,2000
                                                                                               (Unaudited)
------------------------------------------------------------------------------------------------------------
                                                                                    (dollars in thousands)
<S>                                                                    <C>                 <C>

Current Assets
  Cash and cash equivalents                                                    $  35,849           $  88,851
  Time deposit subject to compensating balance arrangement                            --              10,000
  Restricted custodial cash                                                        3,429               4,837
  Accounts receivable--net                                                        52,834              66,524
  Deferred income taxes                                                           10,552              13,947
  Income taxes receivable                                                          7,109                  --
  Prepaid expenses and other current assets                                        3,061               8,661
                                                                       -------------------------------------
         Total current assets                                                    112,834             192,820
Long-term Investments                                                              3,347              23,693
Deferred Income Taxes                                                              1,549               1,500
Restricted Cash                                                                   28,939              27,913
Property and Equipment                                                           118,887             143,110
Less accumulated depreciation                                                    (58,414)            (70,625)
                                                                       -------------------------------------
         Property and equipment--net                                              60,473              72,485
Intangibles
  Cost in excess of net assets acquired--net                                      46,905              43,984
  Software--net                                                                   20,746              31,033
  Other intangible assets--net                                                    15,136              14,625
                                                                       -------------------------------------
         Total intangibles                                                        82,787              89,642
    Total non-current assets                                                     177,095             215,233
                                                                       -------------------------------------
                  Total assets                                                 $ 289,929           $ 408,053
                                                                       =====================================
Current Liabilities
  Accounts payable                                                             $  19,791           $  31,091
  Accrued liabilities:
    Accrued compensation and employee benefits                                    18,172              21,766
    Accrued contract losses                                                       20,599              26,459
    Reserve for legal proceedings                                                  1,554               1,277
    Other                                                                         22,116              26,741
  Borrowing on lines of credit                                                     3,100              12,877
  Long-term debt due within one year                                               1,895               2,197
                                                                       -------------------------------------
         Total current liabilities                                                87,227             122,408
Long-term Debt                                                                     3,597               2,349
Other Long-term Liabilities                                                           --                  50
Commitments and Contingencies
Stockholders' Equity
   Preferred stock $.01 par value; 100,000,000 shares authorized; no shares
        issued and outstanding                                                        --                  --
   Common shares $.01 par value; 250,000,000 shares authorized;
         1999 - 40,000,000 shares and 2000 - 45,500,000 shares issued
        and outstanding                                                              400                 455
   Additional paid-in capital                                                    292,198             391,699
   Accumulated deficit                                                           (92,946)           (107,334)
   Accumulated other comprehensive income (loss)                                    (547)             (1,574)
                                                                       -------------------------------------
         Stockholders' equity                                                    199,105             283,246
                                                                       -------------------------------------
                  Total liabilities and stockholders' equity                   $ 289,929           $ 408,053
                                                                       =====================================
</TABLE>

See notes to Unaudited Consolidated Financial Statements
<PAGE>

                       eFunds Corporation AND SUBSIDIARIES
                      Consolidated Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                          Quarter Ended            Nine Months Ended
                                                                          -------------            -----------------
                                                                          September 30,               September 30,
                                                                          -------------               -------------
(shares and dollars in thousands, except per share amounts)             1999         2000          1999          2000
------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>          <C>           <C>           <C>

Net Sales                                                             $79,895      $104,003      $220,318      $305,228

Cost of sales, excluding loss contract and asset impairment charges    48,656        63,475       136,779       181,672
Loss contract and asset impairment charges                                150            --           267         9,700
------------------------------------------------------------------------------------------------------------------------
     Total cost of sales                                               48,806        63,475       137,046       191,372
------------------------------------------------------------------------------------------------------------------------
Gross Margin                                                           31,089        40,528        83,272       113,856

Selling, general and administrative expenses                           29,758        34,149        74,543       110,342
------------------------------------------------------------------------------------------------------------------------
Income from operations                                                  1,331         6,379         8,729         3,514
------------------------------------------------------------------------------------------------------------------------
Other Income (Expense)
Legal proceedings                                                          --            --         2,094            --
Interest expense                                                         (516)         (687)       (1,070)       (2,860)
Interest and other income (expense)                                    (2,357)        1,182        (2,011)        1,585
------------------------------------------------------------------------------------------------------------------------
Income (Loss) Before Income Taxes                                      (1,542)        6,874         7,742         2,239
------------------------------------------------------------------------------------------------------------------------
Provision for Income Taxes                                             (7,692)       (2,987)      (15,641)       (1,702)
------------------------------------------------------------------------------------------------------------------------
Net (Loss) Income                                                     $(9,234)     $  3,887      $ (7,899)     $    537
------------------------------------------------------------------------------------------------------------------------
Net (Loss) Income per Share - Basic and Diluted                       $ (0.23)     $   0.09      $  (0.20)     $   0.01
------------------------------------------------------------------------------------------------------------------------
Weighted Average Common Shares Outstanding - Basic and Diluted         40,000        45,500        40,000        41,847
------------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes to Unaudited Consolidated Financial Statements

                                       2
<PAGE>

                       eFunds Corporation AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                   Nine Months Ended
                                                                                     September 30,
                                                                              ---------------------------
        (dollars in thousands)                                                    1999          2000
        -------------------------------------------------------------------------------------------------
        <S>                                                                       <C>           <C>

        Cash Flows from Operating Activities
        Net Income (Loss)                                                       $ (7,899)     $    537
        Adjustments to reconcile net income(loss) to net cash provided by
        (used in) operating activities:
              Depreciation                                                         9,326         8,910
              Amortization of intangibles                                          7,257        12,242
              Asset impairment charges                                               267            --
              Equity in pre-acquisition earnings of the professional services      1,114            --
                segment
              Loss on sales of capital assets                                      3,831            91
              Deferred income taxes                                                    4        (3,347)
              Changes in assets and liabilities, net of effects from
                acquisitions:
                   Restricted cash                                               (19,747)         (382)
                   Accounts receivable                                              (691)      (13,243)
                   Accounts payable                                                7,289        12,682
                   Income taxes receivable/payable                                14,664        12,436
                   Reserve for legal proceedings                                 (34,166)         (277)
                   Accrued contract losses                                        (1,685)        5,859
                   Other assets and liabilities                                    4,068        (3,666)
        -------------------------------------------------------------------------------------------------
                   Net cash (used in) provided by operating activities           (16,368)       31,842
        -------------------------------------------------------------------------------------------------
        Cash Flows from Investing Activities
        Capital expenditures                                                     (25,918)      (27,935)
        Payments for acquisitions and investments, net of cash acquired          (35,666)      (20,000)
        Investment in time deposit to establish loan guarantee collateral             --       (10,000)
        Proceeds from sale of capital assets                                          --           407
        Other                                                                       (322)          267
        -------------------------------------------------------------------------------------------------
                   Net cash used in investing activities                         (61,906)      (57,261)
        -------------------------------------------------------------------------------------------------
        Cash Flows from Financing Activities
        Net borrowings on lines of credit                                          2,748         9,491
        Net payments on long-term debt                                            (5,241)       (1,511)
        Proceeds from initial public offering, net of offering costs of $7.0          --        64,459
        million
        Contributions by Deluxe, net                                              86,757        23,905
        Dividends paid to Deluxe                                                      --       (13,800)
        Other                                                                         --             4
        -------------------------------------------------------------------------------------------------
                   Net cash provided by financing activities                      84,264        82,548
        -------------------------------------------------------------------------------------------------
        Net Cash Used by Certain International Operations During December,
                1999 (see Note 7)                                                     --        (4,127)
        Net Increase in Cash and Cash Equivalents                                  5,990        53,002
        Cash and Cash Equivalents at Beginning of Period                          16,055        35,849
        -------------------------------------------------------------------------------------------------
        Cash and Cash Equivalents at End of Period                              $ 22,045      $ 88,851
        -------------------------------------------------------------------------------------------------
</TABLE>

See Notes to Unaudited Consolidated Financial Statements

                                       3
<PAGE>

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
              ----------------------------------------------------

1. The consolidated balance sheet as of September 30, 2000, the consolidated
statements of operations for the quarters and the nine months ended September
30, 1999 and 2000, and the consolidated statements of cash flows for the nine
months ended September 30, 1999 and 2000 are unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of such financial
statements are included. Other than those discussed in the notes below, such
adjustments consist only of normal recurring items. Interim results are not
necessarily indicative of results for a full year. The consolidated financial
statements and notes are presented in accordance with instructions for Form
10-Q, and do not contain certain information included in the Company's annual
consolidated financial statements and notes. The consolidated financial
statements and notes appearing in this report should be read in conjunction with
the Company's audited consolidated financial statements and related notes
included in the final prospectus filed as part of the Company's Registration
Statement on Form S-1 (Registration Number 333-33992) related to its initial
public offering (the S-1).

2. The Company's total comprehensive income (loss) for the quarters ended
September 30, 1999 and 2000 was $(8.7) million and $3.6 million, respectively.
Total comprehensive income (loss) for the nine months ended September 30, 1999
and 2000 was $(8.2) million and $(0.5) million, respectively. The Company's
total comprehensive income (loss) consists of net income (loss) and foreign
currency translation adjustments.

3. As of September 30, 2000, the Company had a $10.0 million credit facility,
denominated in Indian rupees, available to its Indian operations at the lender's
prime interest rate. Borrowings under this facility are due on demand. The
facility is guaranteed by the Company and this guarantee is collateralized by a
$10 million time deposit account maintained by the Company with the lending
bank. The maturity date of this deposit is December 28, 2000 at which time the
collateral may be renewed or replaced by the agreement of both parties. The
average amount drawn on this credit facility during the first nine months of
2000 was $4.6 million at a weighted average interest rate of 15.77%. As of
September 30, 2000, $4.9 million was outstanding at an interest rate of 15.77%.
As of December 31, 1999, $3.1 million was outstanding at an interest rate of
15.81% and the average amount drawn down on this line during 1999 was $2.7
million at a weighted average interest rate of 15.81%.

         Deluxe Corporation (Deluxe) provides the Company with an unsecured
revolving credit facility of up to $75 million. Borrowings under the facility
will be due at the earlier of the effective date of the planned Spin-off of the
Company from Deluxe or December 31, 2000 and will accrue interest at the London
Interbank Offered Rate, or LIBOR, plus a variable additional margin based on
Deluxe's credit rating. Through September 30, 2000, the Company had not borrowed
under this facility. The credit facility includes financial and restrictive
covenants. The Company is currently in compliance with all covenants.

         In addition, the Company routinely borrows from or provides cash to
Deluxe in the ordinary course of business. As of September 30, 2000, the
Company's intercompany borrowings from Deluxe totaled $7.9 million and bore
interest at a rate of 8.48%.

4. During 1997, a judgment was entered against the Company in the U.S. District
Court for the Western District of Pennsylvania. The case was brought against the
Company by Mellon Bank (Mellon) in connection with a potential bid to provide
electronic benefit transfer (EBT) services for the Southern Alliance of States.
In September 1997, the Company recorded a pretax charge of $40 million to
reserve for this judgment and other related costs. In January 1999, the United
States Court of Appeals for the Third Circuit affirmed the judgment of the
district court and the Company paid $32.2 million to Mellon in February 1999.
The portion of the reserve remaining after the payment of this judgment ($2.1
million) was reversed and is reflected in interest and other income (expense) in
the consolidated statement of operations for the nine months ended September 30,
1999.

5. The Company's consolidated balance sheets reflect restructuring accruals of
$1.2 million and $0.7 million as of December 31, 1999 and September 30, 2000,
respectively, for employee severance costs. During the first quarter of 1999,
restructuring accruals of $2.0 million were reversed. These reversals related to
the Company's

                                       4
<PAGE>

decision in 1999 to retain the international operations of its electronic
payments segment. During the second quarter of 2000, additional restructuring
accruals of $355,000 were recorded relating to the continuing reorganization of
the Company. These new restructuring charges and reversals are reflected in
selling, general and administrative (SG&A) expenses in the consolidated
statement of operations for the nine months ended September 30, 2000.

         The following table summarizes the change in the Company's
restructuring accruals for the quarter and nine months ended September 30, 2000
(dollars in thousands):

                                               Number of
                                               employees
                                                affected         Amount
                                             --------------- ---------------
         Balance, December 31, 1999                 6          $   1,242

         Severance paid                            (3)               (91)
         Adjustments to accrual                     1                110
                                             --------------- ---------------

         Balance, March 31, 2000                    4              1,261

         Severance paid                            (4)              (582)
         Adjustments to accrual                    30                355
                                             --------------- ---------------

         Balance, June 30, 2000                    30              1,034
                                             --------------- ---------------

         Severance paid                           (12)              (374)
                                             --------------- ---------------

         Balance, September 30, 2000               18          $     660
                                             --------------- ---------------

6. In March 2000, the Company paid cash of $20.0 million for an approximately
24% interest in a limited liability company that provides automated teller
machine (ATM) management services. This investment is being accounted for under
the equity method of accounting and is included in other long-term investments
in the Company's consolidated balance sheet as of September 30, 2000. The
difference of $20 million between the carrying value of the investment and the
underlying equity in the net assets of the limited liability company is being
accounted for in the same manner as goodwill and is being amortized over 15
years and reflected in the Company's consolidated financial statements in
interest and other income (expense) within the Company's electronic payments
segment.

         The Company has agreed to make up to $35 million of cash available for
supplying ATMs managed by the limited liability company and had supplied $27.9
million of cash for this purpose as of September 30, 2000. This cash is
classified as long-term restricted cash on our balance sheet as of such date.
The Company has also agreed to guarantee up to $3.0 million face value of
equipment leases for Canadian customers of this company and has indicated that,
subject to the mutual agreement of the parties upon definitive terms and
conditions, it would be willing to work towards an arrangement under which the
Company would loan the limited liability company up to $12.0 to enable it to
undertake mutually agreed-upon acquisitions.

7. Effective January 1, 2000, the professional services segment, which had
previously reported its results of operations and financial position on a
one-month lag, changed its reporting dates to coincide with the rest of the
Company's subsidiaries. This change, which was made in conjunction with the
implementation of the Company's central accounting and financial reporting
system, will reflect the financial results of that segment on a more timely
basis and will improve operating and planning efficiencies. The results of
operations for the professional services segment for the month of December 1999
were excluded from the Company's consolidated statements of operations and were
reflected as an adjustment to accumulated deficit during the first quarter of
2000. This segment generated a net loss of $1.1 million in the month of December
1999.

                                       5
<PAGE>

8. During the second quarter of 2000, the Company recorded net charges of $9.7
million for additional expected future losses on the contracts of the government
services segment's employee benefits transfer (EBT) business. This amount is
reflected in cost of sales in the Company's consolidated statements of
operations for the nine months ended September 30, 2000. In April 2000, the
Company completed negotiations with the prime contractor for a state coalition
for which the Company provides EBT services. Prior to this, the Company and the
prime contractor were operating without a binding, legally enforceable contract.
The Company increased its accrual for expected future losses on long-term
service contracts by $12.2 million to reflect the fact that the Company now had
a definitive agreement with this contractor. Although the Company believed that
it did not have a legal obligation to provide services to this coalition, the
states included in this coalition did not have alternate means of delivering
benefits under their entitlement programs. As a result, the Company believed it
could not terminate the provision of services during its contract negotiations
with the prime contractor because any unilateral decision to do so would have
subjected the Company to a substantial risk of litigation by the coalition
states as well as potential claims by the prime contractor. The execution of the
contract allowed the Company to avoid the possibility that its future losses
associated with the provision of these services would be larger than the charge
the Company recorded if the prime contractor ultimately prevailed on all of the
points pursued by it during negotiations. Offsetting this charge was the
reversal of $2.5 million of previously recorded contract loss accruals. These
reversals resulted from productivity improvements and cost savings from lower
than anticipated telecommunications and interchange expenses.

9. The Company has organized its business units into three operating segments
based on the nature of the products and services offered by each: electronic
payments, professional services and government services. Electronic payments
provides transaction processing and ATM outsourcing services and decision
support and risk management products to financial institutions, retailers,
electronic funds transfer networks and e-commerce providers. Professional
services provides information technology consulting and business process
management services to financial services companies and to all of the Company's
and Deluxe's businesses. Government services provides online EBT services under
entitlement programs on behalf of state and local governments and Medicaid
eligibility verification services. The Company's segments operate primarily in
the United States. The electronic payments and professional services segments
also have international operations. Deluxe accounted for 13.1 % and 14.4% of the
Company's net sales during the quarter and the nine months ended September 30,
2000, respectively. It is our intention to integrate our operations more fully,
which may change our presentation of segment information in future periods.

          The accounting policies of the segments are the same as those
described in the summary of significant accounting policies as presented in the
Company's notes to the consolidated financial statements included in the
Company's Registration Statement on Form S-1 (Registration Number 333-33992)
related to its initial public offering. In evaluating segment performance,
management focuses on income from operations. The income from operations
measurement utilized by management excludes special charges (e.g., certain
restructuring charges, asset impairment charges, certain one-time charges that
management believes are not reflective of on-going operations, etc.).

         Prior to the Company's acquisition of the remaining 50% interest in
HCL-Deluxe, N.V. (the joint venture pursuant to which the Company's professional
services business was created) in April 1999, the results of the Company's
professional services business were recorded under the equity method of
accounting. As such, the Company recorded its 50% ownership of the joint
venture's results of operations prior to the acquisition in other expense in the
consolidated statements of operations. To be consistent with management
reporting, the entire results of the joint venture for the pre-acquisition
period are reflected in the business segment information for the professional
services segment as if the business had been a consolidated entity.


                                       6
<PAGE>

         Segment information for the quarters and nine months ended September
30, 1999 and 2000 is as follows (dollars in thousands):

<TABLE>
<CAPTION>

Quarter Ended September 30, 1999               Electronic      Professional    Government                           Total
                                                Payments         Services       Services       Eliminations      Consolidated
------------------------------------------- ---------------- -------------- --------------- ------------------ ----------------
<S>                                         <C>              <C>            <C>             <C>                <C>

Net sales to unaffiliated external
       customers                                $ 61,160         $ 3,092         $13,167         $     --           $   77,419

Net sales to external affiliates                     350           2,126              --               --                2,476

Inter-segment sales                                   --             725              --             (725)                  --

Total sales                                       61,510           5,943          13,167             (725)              79,895
Gross margin excluding
       special charges                            26,881           1,676           2,656             (124)              31,089
Operating income (loss) excluding
       special charges                             2,194          (2,166)          1,303               --                1,331

Special charges                                       --              --              --               --                   --
Gross margin including
       special charges                            26,881           1,676           2,656             (124)              31,089
Operating income (loss) including
       special charges                             2,194          (2,166)          1,303               --                1,331

Depreciation and amortization expense              5,092             679              --               --                5,771

Segment assets                                   198,095          34,837          33,373               --              266,305

Capital purchases                                  7,831           1,255             259               --                9,345
------------------------------------------- ---------------- -------------- --------------- ------------------ ----------------
</TABLE>

<TABLE>
<CAPTION>

Quarter Ended September 30, 2000               Electronic      Professional    Government                           Total
                                                Payments         Services       Services       Eliminations      Consolidated
------------------------------------------- ---------------- -------------- --------------- ------------------ ----------------
<S>                                         <C>              <C>            <C>             <C>                <C>

Net sales to unaffiliated external
       Customers                                $ 75,720         $ 3,403         $11,243         $     --             $ 90,366

Net sales to external affiliates                     197          13,440              --               --               13,637

Inter-segment sales                                   --           2,938              --           (2,938)                  --

Total sales                                       75,917          19,781          11,243           (2,938)             104,003
Gross margin excluding
       special charges                            31,679           6,966           3,395           (1,512)              40,528
Operating income (loss) excluding
       special charges                             6,131            (761)          2,347               --                7,717

Special charges                                      546             792              --               --                1,338
Gross margin including
       special charges                            31,679           6,966           3,395           (1,512)              40,528
Operating income (loss) including
       special charges                             5,585          (1,553)          2,347               --                6,379

Depreciation and amortization expense              6,825             894              --               --                7,719

Segment assets                                   335,095          41,832          29,626               --              406,553

Capital purchases                                 10,851           1,061              --               --               11,912
------------------------------------------- ---------------- -------------- --------------- ------------------ ----------------
</TABLE>

                                       7
<PAGE>

<TABLE>
<CAPTION>

Nine Months Ended                              Electronic      Professional    Government
September 30, 1999 (1)                          Payments         Services       Services       Eliminations       Pro forma
------------------------------------------- ---------------- -------------- --------------- ------------------ ----------------
<S>                                         <C>              <C>            <C>             <C>                <C>

Net sales to unaffiliated external
       Customers                                $176,363         $ 7,802         $36,360         $     --             $220,525

Net sales to external affiliates                     462           3,656              --               --                4,118

Inter-segment sales                                   --           1,610              --           (1,610)                  --

Total sales                                      176,825          13,068          36,360           (1,610)             224,643
Gross margin excluding
       special charges                            75,996           3,693           5,273             (206)              84,756
Operating income (loss) excluding
       special charges                            12,581          (4,398)            210               --                8,393

Special charges                                       --             898              --               --                  898
Gross margin including
       special charges                            75,996           3,693           5,273             (206)              84,756
Operating income (loss) including
       special charges                            12,581          (5,296)            210               --                7,495

Depreciation and amortization expense             15,676           1,050              --               --               16,726

Capital purchases                                 23,913           1,754             396               --               26,063
------------------------------------------- ---------------- -------------- --------------- ------------------ ----------------
</TABLE>

(1)   Pro forma 1999 results assume eFunds completed the acquisition of its 50%
      interest in HCL-Deluxe on January 1, 1999 instead of April 1999.


<TABLE>
<CAPTION>

Nine Months Ended                              Electronic      Professional    Government                           Total
September 30, 2000                              Payments         Services       Services      Eliminations      Consolidated
------------------------------------------- ---------------- -------------- --------------- ------------------ ----------------
<S>                                         <C>              <C>            <C>             <C>                <C>

Net sales to unaffiliated external
       Customers                                $216,635         $10,494         $34,021         $     --             $261,150

Net sales to external affiliates                     675          43,403              --               --               44,078

Inter-segment sales                                   --           7,643              --           (7,643)                  --

Total sales                                      217,310          61,540          34,021           (7,643)             305,228
Gross margin excluding
       special charges                            94,092          22,594          10,156           (3,286)             123,556
Operating income (loss) excluding
       special charges                            13,506          (2,291)          6,211               --               17,426

Special charges                                    2,680           1,532           9,700               --               13,912
Gross margin including
       special charges                            94,092          22,594             456           (3,286)             113,856
Operating income (loss) including
       special charges                            10,826          (3,823)         (3,489)              --                3,514

Depreciation and amortization expense             18,447           2,705              --               --               21,152

Capital purchases                                 24,348           3,587              --               --               27,935
------------------------------------------- ---------------- -------------- --------------- ------------------ ----------------
</TABLE>

                                       8
<PAGE>

         Segment information reconciles to consolidated amounts as follows
(dollars in thousands):

<TABLE>
<CAPTION>
                                                                 Quarter Ended                    Nine Months Ended
                                                                 September 30,                       September 30,
                                                        ------------------------------     ------------------------------
                                                             1999             2000             1999              2000
                                                        -------------    -------------     -------------    -------------
<S>                                                     <C>              <C>               <C>              <C>

Total net sales to external customers
    Total segment net sales to external customers        $  79,895        $  104,003        $  224,643       $  305,228
    Professional services pre-acquisition elimination           --                --            (4,325)              --
                                                        -------------    -------------     -------------    -------------
         Total consolidated net sales to external
         customers                                       $  79,895        $  104,003        $  220,318       $  305,228
                                                        =============    =============     =============    =============

Operating income including special charges
     Total segment operating income                      $   1,331        $    6,379        $    7,495       $    3,514
     Professional services pre-acquisition elimination          --                --             1,234               --
                                                        -------------    -------------     -------------    -------------
          Total consolidated operating income            $   1,331        $    6,379        $    8,729       $    3,514
                                                        =============    =============     =============    =============

Depreciation and amortization expense
     Total segment depreciation and amortization
     expense                                             $   5,771        $    7,719        $   16,726       $   21,152
     Professional services pre-acquisition elimination          --                --              (143)              --
                                                        -------------    -------------     -------------    -------------
          Total consolidated depreciation and
          amortization expense                           $   5,771        $    7,719        $   16,583       $   21,152
                                                        =============    =============     =============    =============

Capital purchases
     Total segment capital purchases                     $   9,345        $   11,912        $   26,063       $   27,935
     Professional services pre-acquisition elimination          --                --              (145)              --
                                                        -------------    -------------     -------------    -------------
          Total consolidated capital purchases           $   9,345        $   11,912        $   25,918       $   27,935
                                                        =============    =============     =============    =============
</TABLE>

<TABLE>
<CAPTION>
                                                                                    September 30,
                                                                        --------------------------------------
                                                                               1999                 2000
                                                                        ------------------   -----------------
<S>                                                                     <C>                  <C>

Total assets
     Total segment assets                                                 $   266,305            $  406,553
     Long-term deferred tax asset not allocated to segments                       268                 1,500
                                                                        ------------------   -----------------
          Total consolidated assets                                       $   266,573            $  408,053
                                                                        ==================   =================
</TABLE>

         Revenues are attributed to geographic areas based on the location of
the assets and employees producing the revenues. The Company's operations by
geographic area are as follows (in thousands):

<TABLE>
<CAPTION>
                                      Total Net Sales to External Customers                   Property & Equipment
                          -------------------------------------------------------------- --------------------------------
                                 Quarters Ended          Nine Months Ended September 30,          September 30,
                          ----------------------------- -------------------------------- --------------------------------
                              1999           2000            1999               2000          1999             2000
                          -------------- -------------- ---------------- --------------- ---------------- ---------------
<S>                       <C>            <C>            <C>               <C>            <C>              <C>

United States                $ 74,267       $ 97,398        $ 205,440      $ 285,922          $ 53,662         $ 65,633
United Kingdom                  4,404          4,254           13,452         12,650             2,507            1,965
India                           1,224          2,351            1,426          6,656             2,358            4,850
Other foreign countries            --             --               --             --                35               37
                          -------------- -------------- ---------------- --------------- ---------------- ---------------

Total consolidated           $ 79,895       $ 104,003       $ 220,318      $ 305,228          $ 58,562         $ 72,485
                          ============== ============== ================ =============== ================ ===============
</TABLE>


10. In January 2000, Deluxe announced that its board of directors approved a
plan to operate the Company as a separate, independent, publicly traded company.
The Company issued 5.5 million shares of common stock to the public in June
2000. Subsequent to this initial public offering, Deluxe continues to own 40
million shares of the Company's common stock, representing 87.9% of the
Company's total outstanding common shares. Proceeds from

                                       9
<PAGE>

the offering, based on the offering price of $13.00 per share, totaled $71.5
million ($64.5 million, net of offering expenses).

         In October 2000, Deluxe announced that it plans to distribute all of
its shares of the Company's common stock to its shareholders through a spin-off
transaction rather than by an exchange offer, or split-off, as had been
previously announced. The 40 million shares of the Company's common stock
currently owned by the Deluxe will now be distributed on a designated
distribution date to every Deluxe shareholder of record on a designated record
date. Each shareholder on the record date will receive a fixed number of the
Company's shares for each Deluxe share owned.

         Deluxe's plans for a spin-off are subject to receiving confirmation
from the Internal Revenue Service that the spin-off will be tax-free to Deluxe
and to its shareholders for U.S. federal income tax purposes. Deluxe has the
sole discretion to determine whether to proceed with the spin-off and to
determine the timing and other aspects of the transaction. Subject to these
conditions, Deluxe plans to complete the spin-off on or before December 31,
2000. Deluxe has submitted a request to the IRS for confirmation that the
spin-off will be tax-free to Deluxe and its shareholders for U.S. federal income
tax purposes. The Company cannot be certain when or whether Deluxe will receive
this confirmation from the IRS, or that the distribution by Deluxe will be
completed. If Deluxe does not complete the spin-off, it will continue to control
the Company, and the Company may not realize the anticipated benefits from the
separation of the two companies.

         In connection with the IPO and the planned spin-off from Deluxe, the
Company and Deluxe have entered into various agreements that address the
allocation of assets and liabilities between them and that define their
relationship after the separation. The agreements relate to matters such as
consummation of the IPO and the distribution of the Company's stock,
registration rights for Deluxe, intercompany loans, information technology
consulting, business process management services, indemnification, data sharing,
real estate matters, tax sharing and transition services. For transition
services, the Company will compensate Deluxe for providing services and will
negotiate for third-party rates after the transition arrangements terminate. The
transition period varies depending on the agreement, but many transition
services will terminate upon the distribution of the Company's stock. Some of
the transition agreements may be extended beyond the initial transition period.
Additionally, Deluxe has agreed to indemnify the Company for future losses
arising from any litigation based on the conduct of the EBT and medical
eligibility verification businesses prior to our IPO in June 2000, and from
future losses on identified loss contracts in excess of the Company's $29.2
million accrual for contract losses as of April 30, 2000. The indemnification
obligation does not apply to losses covered by the existing reserves. The
maximum amount of litigation and contract losses for which Deluxe will indemnify
the Company is $14.6 million. Prior to the spin-off, any indemnification
payments to us will be treated as capital contributions. After the spin-off, any
indemnification payments to the Company will be recorded as income in the
Company's consolidated statements of operations. Through September 30, 2000, no
such indemnification payments have been made.

         The financial information presented in this report many not necessarily
reflect what our financial position, results of operations or cash flows would
have been had we been a separate, stand-alone entity for the periods presented
nor is it indicative of our future financial position, results of operations or
cash flows. We anticipate that many changes will occur in our funding and
operations as a result of our operation as an independent entity and through the
Spin-off.

11. By the beginning of 2001, the Company will begin outsourcing the electronic
payment segment's consumer voice inquiry operations relating to ChexSystems
records. Approximately 300 employees are impacted by this decision. Although
some of these employees may not find other positions within the Company, the
Company does not expect to record a significant restructuring charge in the
fourth quarter of 2000 as a result of this initiative.

12. Certain amounts in the consolidated statements of operations in 1999 have
been reclassified to conform with the 2000 presentation. These changes had no
impact on previously reported results of operations or stockholders' equity.

                                       10
<PAGE>

13. In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 Accounting for Derivative Instruments and
Hedging Activities, which provides guidance on accounting for derivatives and
hedge transactions. The statement is effective for the Company on January 1,
2001. The Company does not anticipate that the effects of this pronouncement
will have a material effect on reported operating results or financial position.

         In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements,
which provides guidance in applying generally accepted accounting principles to
revenue recognition in financial statements. Application of this SAB did not
have a material effect on the Company's reported operating results or financial
position.


Item 2. Management's Discussion and Analysis of Financial Condition and Results
-------------------------------------------------------------------------------
of Operations Company Profile
-----------------------------

         We provide transaction processing and ATM outsourcing services and
decision support and risk management products to financial institutions,
retailers, electronic funds transfer networks, e-commerce providers and
government agencies and offer information technology consulting and business
process management services, both on a standalone basis and as a complement to
our electronic payments business. Our electronic payments segment provides
transaction processing and ATM deployment services and decision support and risk
management products to financial institutions, retailers, electronic funds
transfer networks and ecommerce providers. Our professional services segment
provides information technology consulting and business process management
services to financial services companies and to all of the Company's and
Deluxe's businesses. Our government services segment provides online electronic
benefit transfers (EBT) under entitlement programs on behalf of state and local
governments and Medicaid eligibility verification services. We operate primarily
in the United States. The electronic payments and professional services segments
also have international operations. We presently plan to exit our government
services business when our current contractual commitments expire in 2006.
During the wind-down period, we intend to continue to take steps to improve
profitability of the current business, although the revenues of this business
may decline as existing contracts expire.

         Our businesses have historically been operated as internal units of
Deluxe. In April 1999, Deluxe announced that it was changing its business model
to a holding company structure with four independently operated business units:
paper payments, electronic payments, professional services, and government
services. In January 2000, Deluxe announced that its board of directors had
approved a plan to combine its electronic payments, professional services and
government services businesses into a separate, independent, publicly traded
company.

         We issued 5.5 million shares of common stock to the public in June
2000. Subsequent to this initial public offering, Deluxe continues to own 40
million shares of our common stock, representing 87.9% of our total outstanding
common shares. Proceeds from the offering, based on the offering price of $13.00
per share, totaled $71.5 million ($64.5 million, net of offering expenses).

         In October 2000, Deluxe announced that it plans to distribute all of
its shares of our common stock to its shareholders through a spin-off
transaction rather than by an exchange offer, or split-off, as had been
previously announced. The 40 million shares of our common stock currently owned
by Deluxe will now be distributed on a designated distribution date to every
Deluxe shareholder of record as of a designated record date. Each shareholder
will receive a fixed number of our shares for each Deluxe share owned. Deluxe's
plans for a spin-off are subject to receiving confirmation from the Internal
Revenue Service (IRS) that the spin-off will be tax-free to Deluxe and to its
shareholders for U.S. federal income tax purposes. Deluxe has the sole
discretion to determine whether to proceed with the spin-off and to determine
the timing and other aspects of the transaction. Subject to these conditions,
Deluxe plans to complete the spin-off on or before December 31, 2000. Deluxe has
submitted a request to the IRS for confirmation that the spin-off will be
tax-free to Deluxe and its shareholders for U.S. federal income tax purposes. We
cannot be certain when or whether Deluxe will receive this confirmation from the
IRS, or that the distribution by Deluxe will be completed. If Deluxe does not
complete the spin-off, it will continue to control us, and we may not realize
the anticipated benefits from the separation of the two companies.

                                       11
<PAGE>

         In connection with our IPO and the planned spin-off from Deluxe, we
have entered into various agreements with Deluxe that address the allocation of
assets and liabilities between us and that define our relationship after the
separation. The agreements relate to matters such as consummation of the IPO and
the separation, registration rights for Deluxe, intercompany loans, information
technology consulting, business process management services, indemnification,
data sharing, real estate matters, tax sharing and transition services. For
transition services, we will compensate Deluxe for providing services and will
negotiate for third-party rates after the transition arrangements terminate. The
transition period varies depending on the agreement, but many transition
services will terminate upon the distribution of the our stock. Some of the
transition agreements may be extended beyond the initial transition period.
Additionally, Deluxe has agreed to indemnify us for future losses arising from
any litigation based on the conduct of the EBT and medical eligibility
verification businesses prior to our IPO in June 2000, and from future losses on
identified loss contracts in excess of the Company's $29.2 million accrual for
contract losses as of April 30, 2000. The indemnification obligation does not
apply to losses covered by the existing reserves. The maximum amount of
litigation and contract losses for which the Deluxe will indemnify the us is
$14.6 million. Prior to the spin-off, any indemnification payments to us will be
treated as capital contributions. After the spin-off, any indemnification
payments to us will be recorded as income in the Company's consolidated
statements of operations. Through September 30, 2000, no such indemnification
payments have been made.

         Our consolidated financial statements have been prepared using the
historical results of operations and historical bases of the assets and
liabilities of the Deluxe businesses that comprise our Company. The consolidated
financial statements also include allocations to us of certain liabilities and
expenses, including profit sharing, post-retirement, non-qualified deferred
compensation and other employee benefits, information technology services,
facility costs, and other Deluxe administrative services costs. The expense
allocations have been determined on bases that both Deluxe and we considered to
be a reasonable reflection of the utilization of the services provided to us or
the benefit received by us. The expense allocation methods are based on
headcount, transaction processing costs, square footage and relative sales.

         The financial information presented in this report many not necessarily
reflect what our financial position, results of operations or cash flows would
have been had we been a separate, stand-alone entity for the periods presented
nor is it indicative of our future financial position, results of operations or
cash flows. We anticipate that many changes will occur in our funding and
operations as a result of our operation as an independent entity and through the
Spin-off. In particular, our business was conducted as three business segments
by Deluxe. Accordingly, our financial statements reflect those business
segments: electronic payments, professional services and government services. It
is our intention to integrate our operations more fully, which may change our
presentation of segment information in future periods.

                                       12
<PAGE>

Results of Operations - Quarter and Nine Months Ended September 30, 1999
------------------------------------------------------------------------
Compared to the Quarter and Nine Months Ended September 30, 2000
----------------------------------------------------------------

         The following table presents, for the periods indicated, the relative
composition of net sales and selected statements of operations data as a
percentage of sales:

<TABLE>
<CAPTION>
                                                             Quarter Ended              Nine Months Ended
                                                              September 30                September 30,
                                                         1999             2000        1999             2000
                                                         ----             ----        ----             ----
<S>                                                      <C>              <C>         <C>              <C>
Net sales:
         Electronic payments                             77.0%            73.0%       80.3%            71.2%
         Professional services                            7.4             19.0         3.7             20.2
         Government services                             16.5             10.8        16.5             11.1
         Eliminations                                    (0.9)            (2.8)       (0.5)            (2.5)
                                                        -----            -----       -----            -----
                  Total net sales                       100.0            100.0       100.0            100.0
                                                        -----            -----       -----            -----

Cost of sales:
         Electronic payments                             43.3             42.5        45.8             40.4
         Professional services                            5.3             12.3         2.7             12.8
         Government services:
             Cost of sales                               13.2              7.5        14.0              7.8
             Loss contract charge and asset
             impairment charges                           0.0               --         0.1              3.2
         Eliminations                                    (0.7)            (1.3)       (0.4)            (1.5)
                                                        -----            -----       -----            -----
                  Total cost of sales                    61.1             61.0        62.2             62.7
                                                        -----            -----       -----            -----

Gross margin                                             38.9             39.0        37.8             37.3

Selling, general and administrative expenses             37.2             32.9        33.8             36.1
                                                        -----            -----       -----            -----

Income from operations                                    1.7              6.1         4.0              1.2

Other income (expense):
         Legal proceedings                                 --               --         1.0               --
         Interest and other income (expense)             (3.7)             0.5        (1.5)            (0.4)
                                                        -----            -----       -----            -----

Income before income taxes                                2.0              6.6         3.5              0.8

Provision for income taxes                               (9.6)            (2.9)       (7.1)            (0.6)
                                                        -----            -----       -----            -----

Net (loss) income                                       (11.6)%            3.7%       (3.6)%            0.2%
                                                        =====            =====       =====            =====
</TABLE>


         Net sales - Net sales increased $24.1 million, or 30.2%, to $104.0
million during the third quarter of 2000 from $79.9 million in the third quarter
of 1999. Net sales increased $84.9 million, or 38.5%, to $305.2 million during
the first nine months of 2000 from $220.3 million in the first nine months of
1999. On a full year pro forma basis assuming our April 1999 acquisition of the
remaining 50% interest in our professional services business occurred on January
1, 1999, net sales increased $80.6 million, or 35.9%, to $305.2 million during
the first nine months of 2000 from $224.6 million in the first nine months of
1999.

         Electronic payments net sales increased $14.4 million, or 23.4%, to
$75.9 million during the third quarter of 2000 from $61.5 million in the third
quarter of 1999. Net sales increased $40.5 million, or 22.9%, to $217.3 million
during the first nine months of 2000 from $176.8 million in the first nine
months of 1999. Transaction processing volumes increased 16.3% over the third
quarter of 1999 and 17.7% over the first nine months of 1999. Account
verification inquiry volumes increased 11.8% versus the third quarter of 1999
and 15.6% over the first nine months of 1999. Increased transaction processing

                                       13
<PAGE>

volumes, offset to some extent by lower fees for new customers and customers
renewing their agreements, increased account verification inquiry volumes
coupled with a price increase and expanded collection service product offerings
along with increased utilization of these services contributed significantly to
our growth in the electronic payment segment for the third quarter. In
September, we also entered into a new ATM deployment agreement that has resulted
in incremental revenue. Other items contributing to our nine month growth
include an agreement with an information solutions provider to allow it to use
our DebitBureauSM database with certain of its products and services.

         Professional services sales (including inter-segment sales and sales to
Deluxe) increased $13.9 million to $19.8 million during the third quarter of
2000 from $5.9 million in the third quarter of 1999. Sales (including
inter-segment sales and sales to Deluxe) increased $53.3 million to $61.5
million during the first nine months of 2000 from $8.2 million in the first nine
months of 1999. Sales were not recorded for professional services in the first
quarter of 1999 because of equity accounting prior to our acquisition of the
remaining 50% interest in our professional services business in April 1999. On a
pro forma basis taking into account this acquisition as if it had occurred on
January 1, 1999, professional services sales (including inter-segment sales and
sales to Deluxe) increased $48.5 million in the first nine months of 2000 to
$61.5 million from $13.0 million during the first nine months of 1999. The
growth on both a quarterly and year to date basis was primarily due to a new
contract with Deluxe. It is not expected that the quarterly and year to date
growth rates over pro forma 1999 results are indicative of future results due to
the one time impact of the Deluxe contract. Net sales to non-affiliates
increased 10.1% for third quarter of 2000 over the third quarter of 1999 and
34.5% for the first nine months of 2000 over the first nine months of 1999.

         Deluxe has been, and is expected to continue to be, a significant
customer for our professional services business. Professional service sales to
Deluxe were $13.4 million, or 12.9% of our total net sales, in the third quarter
of 2000 and $43.4 million, or 14.2% of our total net sales, for the first nine
months of 2000. Sales to Deluxe were 79.8% of professional services net sales
(excluding inter-segment sales) in the third quarter of 2000 and 80.5% of its
net sales (excluding inter-segment sales) for the first nine months of 2000. For
our electronic payments business, sales to Deluxe during the third quarter and
first nine months of 2000 were approximately 0.2% of the revenues of this
segment in both periods.

         Beginning in 2000, our software services to Deluxe have been formalized
into a five year software development outsourcing agreement. During the term of
the agreement, we anticipate that Deluxe will spend approximately $43 million
per year for software development based on the actual number of hours of
information technology services that we provide to Deluxe. If Deluxe fails to
reach the $43 million spending target, it will be obligated to make payments for
a portion of our fees based on our estimates of lost profits. We also will
provide business process management services to Deluxe, including accounts
receivable, accounts payable and other general accounting services as well as
data entry services. Deluxe's annual minimum spending target for business
process management services will range from $8.1 million in 2000 to $4.2 million
in 2004. The provision of services by us under the agreement is non-exclusive,
and Deluxe may contract with any third party for the provision of professional
services.

         Government services net sales decreased $2.0 million, or 15.2%, to
$11.2 million during the third quarter of 2000 from $13.2 million in the third
quarter of 1999. Net sales decreased $2.4 million, or 6.6%, to $34.0 million
during the first nine months of 2000 from $36.4 million in the first nine months
of 1999. The decreases for both the quarter and first nine months of 2000 was
primarily due to the expiration of the Maryland electronic benefit transfer
contract partially offset by increased revenues from Medicaid eligibility
verification services. We do not presently expect to grow revenues in this
segment and its revenues may continue to decline each year as existing contracts
expire.

         Cost of sales - Cost of sales increased $14.7 million, or 30.1%, to
$63.5 million during the third quarter of 2000 from $48.8 million in the third
quarter of 1999. Cost of sales increased $54.3 million, or 39.6%, to $191.4
million during the first nine months of 2000 from $137.1 million in the first
nine months of 1999. As a

                                       14
<PAGE>

percentage of net sales, cost of sales were 61.0% during the third quarter of
2000, relatively flat with the 61.1% recorded in the third quarter of 1999, and
increased to 62.7% during the first nine months of 2000 as compared to 62.2% in
the first nine months of 1999. This increase was due to additional net charges
of $9.7 million for loss contracts in the government services business taken in
the second quarter of 2000. Excluding these net charges, cost of sales as a
percentage of net sales would have been 59.5% for the first nine months of 2000.

         Electronic payments cost of sales increased $9.6 million, or 27.7%, to
$44.2 million during the third quarter of 2000 from $34.6 million in the third
quarter of 1999. Cost of sales increased $22.4 million, or 22.2%, to $123.2
million during the first nine months of 2000 from $100.8 million in the first
nine months of 1999. As a percentage of electronic payments net sales, cost of
sales increased to 58.3% during the third quarter of 2000 as compared to 56.3%
during the third quarter of 1999 and decreased to 56.7% during the first nine
months of 2000 as compared to 57.0% during the first nine months of 1999. The
quarter over quarter increase in cost of sales as a percentage of net sales is
due to a new ATM deployment agreement with respect to which cost of sales
currently approximates the associated net sales.

         Professional services cost of sales (including the cost of
inter-segment sales and sales to Deluxe) increased $8.5 million to $12.8 million
during the third quarter of 2000 from $4.3 million in the third quarter of 1999.
Cost of sales (including the cost of inter-segment sales and sales to Deluxe)
increased $32.9 million to $38.9 million during the first nine months of 2000
from $6.0 million in the first nine months of 1999. As a percentage of
professional services sales, cost of sales decreased to 64.8% in the third
quarter of 2000 compared to 71.8% in the third quarter of 1999 and decreased to
63.3% in the first nine months of 2000 compared to 73.2% in the first nine
months of 1999. We recorded no cost of sales for professional services in the
first quarter of 1999 because of equity accounting prior to our acquisition of
the remaining 50% interest in this business in April 1999. On a full year pro
forma basis taking into account this acquisition as if it had occurred on
January 1, 1999, cost of sales for professional services (including the cost of
inter-segment sales and sales to Deluxe) increased $29.6 million in the first
nine months of 2000 to $39.0 million from $9.4 million in the first nine months
of 1999. As a percentage of professional services net sales, pro forma cost of
sales were 71.7% in the first nine months of 1999. The quarter and year to date
increases in cost of sales were driven primarily by our new contract with
Deluxe. The decreases in cost of sales as a percentage of net sales in 2000 from
pro forma 1999 results were due to the increased profitability of new contracts,
less reliance on sub-contractors and an increasing portion of work being
performed at our India facilities where margins are higher.

         Government services cost of sales decreased $2.7 million, or 25.3%, to
$7.8 million during the third quarter of 2000 from $10.5 million in the third
quarter of 1999. Cost of sales increased $2.4 million, or 7.7%, to $33.5 million
during the first nine months of 2000 from $31.1 million in the first nine months
of 1999. As a percentage of government services net sales, cost of sales
decreased to 69.8% during the third quarter of 2000 as compared to 79.8% in the
third quarter of 1999 and increased to 98.7% during the first nine months of
2000 as compared to 85.5% in the first nine months of 1999. This increase was
due to additional net charges of $9.7 million for additional expected future
losses on EBT contracts. In April 2000, we completed negotiations with the prime
contractor for a state coalition for which we provide EBT services. Previously,
we were operating without a binding, legally enforceable contract with this
contractor. We increased our accrual for expected future losses on long-term
service contracts by $12.2 million to reflect the fact that we now have a
definitive agreement with this contractor. Although the Company believed that it
did not have a legal obligation to provide services to this coalition, the
states included in this coalition did not have alternate means of delivering
benefits under their entitlement programs. As a result, the Company believed it
could not have terminated the provision of services during its contract
negotiations with the prime contractor because any unilateral decision to do so
would have subjected the Company to a substantial risk of litigation by the
coalition states as well as potential claims by the prime contractor. The
execution of the contract allowed the Company to avoid the possibility that its
future losses associated with the provision of these services would be larger
than the charge the Company recorded if the prime contractor ultimately
prevailed on all of the points pursued by it during negotiations. Offsetting
this charge was the reversal of $2.5 million of previously recorded contract
loss accruals resulting from productivity improvements and cost savings from
lower than anticipated telecommunications and interchange expenses. Excluding
the $9.7 million of net charges, cost of sales as a percentage of net sales
would have been 70.2% for the first nine months of 2000. The reduction in cost
of sales on a percentage basis for the three and nine month periods (exclusive
of the $9.7 million charge) is a reflection

                                       15
<PAGE>

of programs implemented in order to reduce the cost of supporting a declining
revenue stream in future years in the government services business.

         Gross margin - Gross margin increased $9.4 million, or 30.2%, to $40.5
million during the third quarter of 2000 from $31.1 million in the third quarter
of 1999. Gross margin increased $30.6 million, or 36.8%, to $113.9 million
during the first nine months of 2000 from $83.3 million in the first nine months
of 1999. As a percentage of net sales, gross margin increased slightly to 39.0%
during the third quarter of 2000 as compared to 38.9% in the third quarter of
1999 and decreased to 37.3% during the first nine months of 2000 as compared to
37.8% in the first nine months of 1999. The decreases in gross margin as a
percentage of net sales for the nine month period were due to the additional net
charges of $9.7 million for loss contracts in the government services business
recorded during the second quarter of 2000. Excluding these net charges, gross
margin as a percentage of net sales would have been 40.5% for the first nine
months of 2000. The improvement over the first nine months of 1999 was due to a
shift toward electronic customer inquiries in the account verification business
which generate higher margins, increased utilization of existing infrastructure,
less reliance on sub-contractors, an increasing portion of work being performed
at the India facilities where margins are higher and the implementation of cost
containment measures within the government services business. Partially
offsetting these improvements was the new ATM deployment agreement entered into
in September 2000. In the third quarter, this agreement exhibited a slight loss.

         Selling, general and administrative (SG&A) expenses - SG&A expenses
increased $4.4 million, or 14.8%, to $34.1 million during the third quarter of
2000 from $29.7 million in the third quarter of 1999. SG&A expenses increased
$35.8 million, or 48.0%, to $110.3 million during the first nine months of 2000
from $74.5 million in the first nine months of 1999. As a percentage of net
sales, SG&A expenses decreased to 32.8% during the third quarter of 2000
compared to 37.2% in the third quarter of 1999 and increased to 36.2% during the
first nine months of 2000 as compared to 33.8% in the first nine months of 1999.
Costs of $2.9 million and $1.3 million incurred in the second and third quarters
of 2000, respectively, for transition costs related to the separation of the
Company from Deluxe and severance contributed to the SG&A increase versus 1999.
We will incur additional costs and expenses associated with the separation from
Deluxe in future periods. For the first nine months of 2000, the increase in
SG&A was primarily due to the acquisition of the remaining 50% interest in our
professional services business in April 1999. No SG&A expenses were recorded for
professional services in the first quarter of 1999 because of equity accounting
prior to this acquisition. Other factors contributing to the year to date
increase were additional promotional advertising geared toward creating brand
awareness of the eFunds name, infrastructure investments needed to support
higher levels of business in the professional services area both in the United
States and India and increased goodwill expense due to the acquisition of an
electronic check conversion company in February 1999. Also, in the first quarter
of 1999, $2.0 million of restructuring accruals from prior periods were
reversed, reducing SG&A expenses for the first nine months of that year.

         Other income (expense) - Other income (expense)was $0.5 million during
the third quarter of 2000 compared to $(2.9) million in the third quarter of
1999. Other income expense was $(1.3) million during first nine months of 2000
compared $(3.1) million for the comparable period of 1999. Other income
(expense) in 2000 includes the interest earned on the proceeds of our public
offering offset by interest expense related to our intercompany balance payable
to Deluxe. In 1999, other income (expense) included interest income earned from
our intercompany balance receivable from Deluxe and reversals of $2.1 million of
reserves for legal accruals offset by losses recorded under the equity method of
accounting for the professional services business. Prior to our acquisition of
the remaining ownership interest in this business in April 1999, we recorded our
50% share of the joint venture's losses in interest and other expense. Our
intercompany receivable was declared as a dividend to Deluxe at the end of
1999and at March 31, 2000. During the first nine months of 2000, net
intercompany balances were in a payable position to Deluxe.

                                       16
<PAGE>

         Provision for income taxes - Our effective tax rate during the third
quarter of 2000 was 43.5%, compared to the third quarter of 1999 rate of 498.8%.
The effective tax rate for the first nine months of 2000 was 76.0% compared to
the first nine months of 1999 rate of 202.0%. The higher rates in the 1999
quarter and nine month periods were due primarily to losses in the professional
services business for which no benefit could be recognized. The 2000 rates are
further reduced by the utilization of foreign net operating loss carryforwards
and lower foreign statutory tax rates.


Liquidity, Capital Resources and Financial Condition

         As of September 30, 2000, cash and cash equivalents were $88.9 million.
In addition we had a $10.0 million time deposit account pledged as collateral to
support our guarantee of a credit facility available to our Indian operations.
The maturity date of this deposit is December 28, 2000, at which time the
collateral may be renewed or replaced by the agreement of both parties. We also
had $4.8 million of restricted cash that we temporarily hold in custodial
accounts on behalf of clients and had supplied $27.9 million in restricted cash
to ATMs deployed by us. We have agreed with the company who manages this ATM
base to make up to $35 million of cash available for this purpose. We have also
agreed to guarantee up to $3.0 million face value of equipment leases for
Canadian customers of this company and we have indicated that, subject to the
mutual agreement of the parties upon definitive terms and conditions, we would
be willing to work towards an arrangement under which the Company would loan the
limited liability company up to $12.0 million to enable it to undertake mutually
agreed-upon acquisitions.

         As of September 30, 2000, we had a $10.0 million credit facility,
denominated in Indian rupees, available to our Indian operations at the lender's
prime interest rate. Borrowings under this facility are due on demand. The
facility is guaranteed by us and this guarantee is collateralized by a $10
million time deposit account maintained by us with the lending bank. The
maturity date of this deposit is December 28, 2000, at which time the collateral
may be renewed or replaced by the agreement of both parties. The average amount
drawn on this credit facility during the first nine months of 2000 was $4.6
million at a weighted average interest rate of 15.77%. As of September 30, 2000,
$4.9 million was outstanding at an interest rate of 15.77%. As of December 31,
1999, $3.1 million was outstanding at an interest rate of 15.81% and the average
amount drawn down on this line during 1999 was $2.7 million at a weighted
average interest rate of 15.81%.

         Deluxe provides us with an unsecured revolving credit facility of up to
$75 million until the earlier of the spin-off or December 31, 2000. Borrowings
under the facility will be due at the spin-off or maturity and will accrue
interest at the London Interbank Offered Rate, or LIBOR, plus a variable
additional margin based on Deluxe's credit rating. Through September 30, 2000,
we had not borrowed under this facility . The credit facility includes financial
and restrictive covenants. We are currently in compliance with all covenants. We
intend to replace this facility with a new credit facility with one or more
financial institutions prior to the earlier of the spin-off or maturity. A
replacement credit facility may not be available to us, or if available, we may
not be able to obtain it on a timely basis or on terms acceptable to us. If we
are unable to secure a replacement credit facility prior to the earlier of the
spin-off or maturity, we will repay the amount then outstanding under the Deluxe
facility from available cash and cash equivalents. In addition, the Company
routinely borrows from or provides cash to Deluxe in the ordinary course of
business. As of September 30, 2000, the Company's intercompany borrowings from
Deluxe totaled $7.9 million and bore interest rate of 8.48%.

                                       17
<PAGE>

         The following table sets forth a summary of cash flow activity and
should be read in conjunction with our consolidated statements of cash flows:

<TABLE>
<CAPTION>
                                                             Summary of Cash Flows
                                                        Nine Months Ended September 30,
                                                       ----------------------------------
                                                           1999               2000
                                                       --------------    ----------------
<S>                                                    <C>               <C>

                                                                (in thousands)
Cash (used in) provided by operating activities         $  (16,368)        $    31,842
Cash used in investing activities                          (61,906)            (57,261)
Cash provided by financing activities                       84,264              82,548
Cash used by certain international operations
   during December, 1999                                        --              (4,127)
                                                       --------------     ---------------
Net increase in cash and cash equivalents               $    5,990         $    53,002
                                                       ==============     ===============
</TABLE>

         Cash flows from operating activities were $31.8 million and $(16.4) for
the nine months ended September 30, 2000 and 1999 respectively. The increase in
operating cash flow reflects the use of $32.2 million to pay a judgment to
Mellon Bank in a legal proceeding related to our government services business
for which we had accrued $40 million in 1997 and approximately $18 million to
supply cash to ATMs managed by a client of our electronic payments business
during the nine months ended September 30, 1999. These significant outflows of
operating cash did not recur during the nine months ended September 30, 2000.

         Cash used in investing activities was $57.3 million during the nine
months ended September 30, 2000, due in part to purchases of capital assets of
$27.9 million, including $12.9 million for capitalized product development
related expenditures. We also invested $20.0 million to purchase a 24% interest
in a provider of ATM management services and $10 million in a time deposit to
establish collateral to support our guarantee under our Indian credit facility.
Cash used in investing activities was $61.9 million during the nine months ended
September 30, 1999, primarily due to purchases of capital assets of $25.9
million, including $19.9 million for product development related expenditures.
We also invested net cash of $35.7 million to purchase the remaining 50%
interest in our professional services business and an electronic check
conversion company.

         Cash provided from financing activities was $82.5 million the during
the nine months ended September 30, 2000. Cash provided by our initial public
offering was $64.5 million. Cash provided by Deluxe was $23.9 million and
dividends paid to Deluxe were $13.8 million. We obtained $9.5 million from
borrowings on short-term debt and used cash to repay debt of $1.5 million. Cash
provided from financing activities was a net $84.3 million during the nine
months ended September 30, 1999. Deluxe provided $86.7 million and we used cash
to repay debt of $5.2 million.

         Net cash used by the professional services segment during December 1999
represents the change in the results of operations and financial position of our
professional services business. Previously, this business reported their results
of operations and financial position on a one-month lag. In January 2000, this
business changed its reporting period to coincide with the rest of our Company.

         We had capital expenditures of $27.9 million in the nine months ended
September 30, 2000, and $38.2 million during calendar 1999. We anticipate our
total capital expenditures in 2000 will approximate $45 million with the
increase in the fourth quarter being used to complete the integration of
existing infrastructure and for continued spending on product development. In
particular, we intend to consolidate our data centers and customer contact
centers. Portions of these projects will extend into 2001.

         We believe that cash generated from operations, borrowings under our
credit facilities and the net proceeds from our initial public offering will
provide sufficient funds for our operations for the foreseeable future.

                                       18
<PAGE>

Recent Developments

         We issued 5.5 million shares of common stock to the public in June
2000. Subsequent to this initial public offering, Deluxe continues to own 40
million shares of our common stock, representing 87.9% of our total outstanding
common shares. Proceeds from the offering, based on the offering price of $13.00
per share, totaled $71.5 million ($64.5 million, net of offering expenses).

         In October 2000, Deluxe announced that it plans to distribute all of
its shares of our common stock to its shareholders through a spin-off
transaction rather than by an exchange offer, or split-off, as had been
previously announced. The 40 million shares of our common stock currently owned
by Deluxe will now be distributed on a designated distribution date to every
Deluxe shareholder of record on a designated record date. Each shareholder on
the record date will receive a fixed number of our shares for each Deluxe share
owned.

         Deluxe's plans for a spin-off are subject to receiving confirmation
from the IRS that the spin-off will be tax-free to Deluxe and to its
shareholders for U.S. federal income tax purposes. Deluxe has the sole
discretion to determine whether to proceed with the spin-off and to determine
the timing and other aspects of the transaction. Subject to these conditions,
Deluxe plans to complete the spin-off on or before December 31, 2000. Deluxe has
submitted a request to the IRS for confirmation that the spin-off will be
tax-free to Deluxe and its shareholders for U.S. federal income tax purposes. We
cannot be certain when or whether Deluxe will receive this confirmation from the
IRS, or that the distribution by Deluxe will be completed. If Deluxe does not
complete the spin-off, it will continue to control the us, and we may not
realize the anticipated benefits from the separation of the two companies.

         By the beginning of 2001, we will begin outsourcing the electronic
payment segment's consumer voice inquiry operations relating to ChexSystems
records. Approximately 300 employees are impacted by this decision. Although
some of these employees may not find other positions within the Company, we do
not expect to record a significant restructuring charge in the fourth quarter of
2000 as a result of this initiative.

Forward Looking Statements

          Based on the results of operations for the third quarter ended
September 30, 2000, eFunds has the following expectations for the quarter ending
December 31, 2000. These expectations are forward-looking, and actual results
may differ materially.

     -    The Company expects revenues for the fourth quarter of 2000 to be in
          the range of $110 - $112 million as a result of new contracts signed
          in the third quarter and expected to be signed in the fourth quarter.
     -    The Company expects its gross margin percentage for the fourth quarter
          to be approximately 39 percent of revenues as the new contracts are
          not expected to contribute to margins in the early stages of
          implementation. However, the Company expects its gross margin to move
          up into a target range of 45 -50 percent of revenues in the medium
          term.
     -    Selling, general and administrative expense in the fourth quarter of
          2000 is expected to be in line with third quarter expense, as a
          percentage of revenue, before special charges, which are not expected
          to exceed $2 million.
     -    Operating income, after special charges, is expected to be in excess
          of current analysts' expectations and in line with the third quarter
          of 2000.
     -    The Company expects interest and other non-operating income for the
          fourth quarter of 2000 to be approximately $0.6 million.
     -    For normal operating items, the marginal tax rate for the fourth
          quarter and full year 2000 is expected to be approximately 38 percent.
          However, as in previous quarters, the tax rate for the fourth quarter
          will be negatively impacted by non-deductible goodwill charges of
          approximately $1 million ($4 million for the full year). The total tax
          expense, including the impact of these non-deductible charges is
          expected to be approximately $3 million in the fourth quarter.
     -    Earnings per share are expected to be in line with current analysts'
          expectations of $0.08 per share, after all special charges.

                                       19
<PAGE>

     -    Capital spending for 2000 is expected to be approximately $45 million
          reflecting the build-out of the new Mumbai call center, data center
          consolidation as well as infrastructure needs as a result of eFunds'
          separation from Deluxe.
     -    Depreciation and amortization is expected to be approximately $8
          million in the fourth quarter of 2000 and $29 million for the full
          year.

Recently Issued Accounting Standards

         In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities, which provides guidance on accounting for derivatives
and hedge transactions. The statement is effective for the company on January 1,
2001. We do not anticipate that the effects of this pronouncement will have a
material impact on our reported operating results or financial position.

         In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements,
which provides guidance in applying generally accepted accounting principles to
revenue recognition in financial statements. The application of this SAB did not
have a material impact on our reported operating results or financial position.


Item 3.  Quantitative and Qualitative Disclosure About Market Risk
------------------------------------------------------------------

         We operate internationally, and so are subject to potentially adverse
movements in foreign currency rate changes. We have not entered into foreign
exchange forward contracts to reduce our exposure to foreign currency rate
changes on intercompany foreign currency denominated balance sheet positions. As
of September 30, 2000, we have borrowed $4.9 million on a line of credit
denominated in Indian rupees. The rupee-denominated funds borrowed are used
exclusively by the business within India to pay for expenses denominated in
Indian rupees.

         We are exposed to foreign exchange risk to the extent of adverse
fluctuations in the Indian rupee and the British pound. We do not believe that a
change in the Indian rupee and British pound exchange rates of 10% would result
in a material effect on our future earnings, financial position or cash flows.


                           PART II - OTHER INFORMATION


Item 1. Legal Proceedings
-------------------------

     On May 14, 1999, we filed a trademark infringement action against Citizen
Advisers, Inc. in the United States District Court for the Central District of
California. The complaint alleges false designation of origin and trademark
infringement, trade name infringement and unfair competition under California
law regarding the use of the "E FUND" mark and efund.com internet domain by
Citizen Advisers. We are seeking injunctive relief to prevent Citizen Advisers
from using the "E FUND" mark and efund.com internet domain, cancellation of
Citizen Advisers trademark registration of the "E FUND" mark and damages and
expenses, including attorneys' fees. Citizen's has amended its answer to our
complaint in this action to assert claims against us based on our use of the
mark "eFunds." We have reached an agreement in principle with Citizens pursuant
to which this litigation would be settled without payment by either side to the
other. The case is in the discovery stage and no trial date has been set.

     On June 2, 2000, we, Deluxe and a number of financial institutions were
sued by James Stern in the Los Angeles Superior Court. Mr. Stern alleged that
our ChexSystems product racially profiles and discriminates against minorities
and prevents customers from living above the poverty level. We removed this case
to the United States District Court for the Central District of California on
June 30, 2000. On September 12, 2000, the District Court dismissed Mr. Stern's
case for failure to state a claim. The District Court gave Mr. Stern leave to
amend and refile his complaint and he did so on September 19, 2000 in the
District Court alleging unfair business practices and civil

                                       20
<PAGE>

rights violations by all defendants. The case was subsequently remanded to the
Los Angeles Superior Court. We consider this amended complaint to be frivolous
and wholly without merit and our motion to strike portions of the amended
complaint is pending before the Superior Court.

Item 2. Changes in Securities and Use of Proceeds
-------------------------------------------------

         The Registration Statement on Form S-1 (Registration No. 333-33992)
related to our initial public offering of shares of our common stock (together
with certain associated preferred stock purchase rights) was declared effective
on June 26, 2000, and the related offering commenced on June 27, 2000. We sold
5,500,000 shares at a price of $13.00 per share on June 30, 2000 for an
aggregate public offering price of $71,500,000. The following table summarizes
the costs and expenses incurred for our account in connection with the offering:

<TABLE>
<CAPTION>
<S>                                                                             <C>
         Underwriting discounts and commissions.................................$5,005,000
         Expenses and financial advisory fees paid for or to underwriters.......   402,783
         SEC Registration Fee...................................................    30,360
         NASD Filing Fee........................................................    12,000
         Nasdaq Filing Fee......................................................   110,531
         Accountants' fees and expenses.........................................   754,509
         Legal fees and expenses................................................   310,907
         Printing and engraving expenses........................................   357,840
         Transfer agent and registrar fees......................................     1,234
         Miscellaneous expenses.................................................    55,466
                                                                                ----------
              Total.............................................................$7,040,630
                                                                                ==========
</TABLE>


         The net offering proceedings to the Company after deducting the total
expenses described above is estimated to be $64,459,370. The following table
summarizes the amount of these net offering proceeds that were used during the
period from the effective date of the offering through September 30, 2000 for
the purposes shown:

<TABLE>
<CAPTION>
<S>                                                                             <C>
         Infrastructure and cost savings initiatives............................$ 2,800,000*
         Product development expenditures.......................................  2,900,000*
         Construction of plants, buildings and facilities........................ 5,800,000*
         Purchase and installation of machinery and equipment....................         0
         Purchases of real estate................................................         0
         Acquisition of other businesses.........................................         0
         Repayment of indebtedness...............................................         0
         Working capital.........................................................         0
         Temporary investments (money market funds and commercial paper having a
         maturity of two weeks or less)......................................... 52,959,370
                                                                                -----------
              Total.............................................................$64,459,370
                                                                                ===========
</TABLE>

         ----------
         * Estimated.

         None of the expenses incurred for the Company's account in connection
with the offering nor the proceeds thereof were paid to any director, officer,
or general partner of the Company and its associates or to any person owning 10
percent or more of any class of the Company's securities or otherwise affiliated
with the Company.

                                       21
<PAGE>

                            Item 5. Other Information

Risk Factors and Cautionary Statements.
--------------------------------------
When used in this Quarterly Report on Form 10-Q and in future filings by the
Company with the Securities and Exchange Commission (the "Commission"), in the
Company's press releases, letters to shareholders and in oral statements made by
the Company's representatives, the words or phrases "should result," "are
expected to," "targeted," "will continue," "will approximate," "is anticipated,"
"estimate," "project" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are necessarily subject to
certain risks and uncertainties, including those discussed below, that could
cause actual results to differ materially from the Company's historical
experience and its present expectations or projections. Caution should be taken
not to place undue reliance on any such forward-looking statements, which speak
only as of the date made. The factors listed below could affect the Company's
financial performance and could cause the Company's actual results for future
periods to differ from any opinions or statements expressed with respect
thereto. Such differences could be material and adverse. The Company will not
undertake and specifically declines any obligation to publicly release the
result of any revisions which may be made to any forward-looking statements to
reflect events or circumstances occurring after the date of such statements or
to reflect the occurrence of anticipated or unanticipated events.

Risks Relating to Our Business and Industry

     We have had net losses over the past several years, and we may not sustain
profitability.

     We had net losses of $8.2 million in 1999, $14.6 million in 1998 and $34.1
million in 1997, and, although we had net income of $537,000 for the nine months
ended September 30, 2000, we may not maintain profitability. Our ability to
maintain profitable operations will depend on growth in electronic debit
payments, our ability to attract new clients, the market acceptance of our new
products and services and our ability to control further losses on government
services contracts. In addition, our professional services business, which we
began to offer in September 1997, contributed operating losses of $3.8 million
during the first nine months of 2000, $10.7 million in 1999, $3.4 million in
1998 and $1.6 million in 1997. As a consequence, the prospects for our
professional services business must be considered in light of the risks and
uncertainties encountered by businesses in the early stage of development in new
and rapidly evolving markets.

     Our government services business has not been profitable and Deluxe's
indemnification may not be adequate.

     Our government services business contributed operating losses of
approximately $3.5 million during the first nine months of 2000, $6.6 million in
1999, $47.7 million in 1998 and $12.3 million in 1997. These amounts include
losses we recognized in 2000, 1999 and 1998 that represent probable future
losses from unprofitable long-term service contracts and the write-off of assets
associated with this business. The losses on the long-term service contracts
result from the revenues from the contracts being lower than expected and the
expenses to service the contract being higher than anticipated. The assets
associated with the government services business were written off because this
business has a negative overall cash flow and its assets have no resale value.
We presently intend to exit the government services business after we complete
our obligations under our long-term contracts in 2006.

     Deluxe has agreed to indemnify us for future losses arising from any
litigation based on the conduct of the business prior to our initial public
offering and future losses on identified loss contracts in excess of our $29.2
million loss contract reserves as of April 30, 2000, which amount includes the
net $9.7 million charge we recorded during the second quarter of 2000. This
indemnification obligation does not apply to losses contemplated by the existing
reserve and is subject to a $14.6 million limit, so that it would not apply to
any future losses on our existing unprofitable contracts in excess of $43.8
million. In addition, Deluxe's indemnification does not apply to any contract
that was not in a loss position as of April 30, 2000 and so if any of these
profitable contracts were to become unprofitable, no indemnification would be
available. Our loss contract reserves are based on estimates of future
performance of identified contracts, and the estimated results may not be
realized. As a result, we may incur losses beyond our current reserves and
Deluxe's indemnification. For example, a continuing strong economy, which could

                                       22
<PAGE>

further reduce the number of welfare recipients below our current expectations,
could increase our projected future losses. These excess losses would be
recognized in future periods and decrease our earnings for those future periods.
In addition, we may be unable to effectively manage our exit from the government
services business if we are unable to retain key employees and reduce our costs
as currently projected, which could result in further losses.

     We have only a limited history with our current business plan.

     Our business model is still new and developing. In April 1999, we began the
process of combining five of Deluxe's former operating units into an integrated
electronic debit payment business. The businesses we combined were Deluxe
Electronic Payment Systems, Inc., DebitBureauSM, ChexSystems, Inc., Deluxe
Payment Protection Systems, Inc. and an electronic check conversion company that
was acquired in February 1999. Deluxe Electronic Payment Systems, Inc. and the
electronic check conversion company primarily process debit transactions. The
other companies maintain databases that help financial institutions and
retailers to determine whether to open a new checking or savings account for or
accept a check from a consumer. We combined these businesses in order to couple
our risk management products with our transaction processing capabilities in an
effort to create more products and services than the businesses would have
created as independent operating units. In January 2000, we decided to combine
our professional services business with our electronic payments business because
the addition of the information technology expertise of this business would
enhance our ability to develop, customize, install and maintain our products. We
may not be able to realize the anticipated strategic and other benefits of these
combinations in a timely manner, or at all. Our management has been and will
continue to be required to devote substantial attention to the process of
integrating our operations, technologies and personnel and consolidating our
infrastructure. The diversion of management's attention and any difficulties
encountered during the transition could have an adverse impact on our on-going
business activities and limit our growth.

     Estimates of future financial results are inherently unreliable.

     From time to time, representatives of the Company may make public
predictions or forecasts regarding the Company's future results, including
estimates regarding future earnings or earnings from operations. Any forecast
regarding the Company's future performance reflects various assumptions. These
assumptions are subject to significant uncertainties, and, as a matter of
course, many of them will prove to be incorrect. Further, the achievement of any
forecast depends on numerous factors (including those described in this
discussion), many of which are beyond the Company's control. As a result, there
can be no assurance that the Company's performance will be consistent with any
management forecasts or that the variation from such forecasts will not be
material and adverse. Investors are cautioned not to base their entire analysis
of the Company's business and prospects upon isolated predictions, but instead
are encouraged to utilize the entire available mix of historical and
forward-looking information made available by the Company, and other information
affecting the Company and its products, when evaluating the Company's
prospective results of operations.

     In addition, representatives of the Company may occasionally comment
publicly on the perceived reasonableness of published reports by independent
analysts regarding the Company's projected future performance. Such comments
should not be interpreted as an endorsement or adoption of any given estimate or
range of estimates or the assumptions and methodologies upon which such
estimates are based. Undue reliance should not be placed on any comments
regarding the conformity, or lack thereof, of any independent estimates with the
Company's own present expectations regarding its future results of operations.
The methodologies employed by the Company in arriving at its own internal
projections and the approaches taken by independent analysts in making their
estimates are likely different in many significant respects. Although the
Company may presently perceive a given estimate to be reasonable, changes in the
Company's business, market conditions or the general economic climate may have
varying effects on the results obtained through the use of differing analyses
and assumptions. The Company expressly disclaims any continuing responsibility
to advise analysts or the public markets of its view regarding the current
accuracy of the published estimates of outside analysts. Persons relying on such
estimates should pursue their own independent investigation and analysis of
their accuracy and the reasonableness of the assumptions on which they are
based.

                                       23
<PAGE>

     If we fail to develop and introduce new and enhanced products and services,
we will not be able to compete effectively and our ability to generate revenues
will suffer.

     Our success will depend in part on our ability to continue to develop and
introduce new and enhanced electronic debit payment products and services that
keep pace with competitive introductions, technological changes and changing
customer preferences. If we fail to anticipate or respond adequately to new
developments, we may lose opportunities for business with both current and
potential customers.

     Legislation relating to consumer privacy protection could harm our ability
to collect and use data, increase our operating costs or otherwise harm our
business.

     Existing and new laws and regulations relating to consumer privacy
protection could harm our ability to collect and use consumer data, increase our
operating costs or otherwise harm our business. We collect personal data about
consumers for use in our decision support and risk management products. The
information we collect includes names and addresses, social security numbers,
drivers license numbers, checking and savings account numbers and payment
history records such as account closures and returned checks. Due to the
increasing public concern over consumer privacy rights, Congress and state
legislatures have adopted and are considering adopting laws and regulations
restricting the purchase, sale and sharing of personal information about
consumers. For example, some states have restricted the sale of motor vehicle
records, including drivers license lists, and some states refuse to disclose
this information at all.

     The new federal financial modernization law, known as the
Gramm-Leach-Bliley Act, imposes significant new consumer information privacy
requirements on any entity engaged in the business of providing financial
services, including entities that provide services to financial institutions.
Federal agencies, such as the Comptroller of the Currency and the Federal Trade
Commission, have issued regulations to implement these requirements. The Act
requires covered companies to develop and implement policies to protect the
security and confidentiality of consumers' nonpublic personal information and to
disclose those policies to consumers before a customer relationship is
established and annually thereafter. In addition, the Act requires covered
companies to give an opt-out notice to consumers before sharing consumer
information with third parties. The opt-out notice requirement in the Act is
subject to several exceptions for credit reporting and fraud prevention
purposes. Although we believe these exceptions apply to our business, government
agencies could interpret their regulations in a manner that could expand the
scope of the Act in ways which could adversely affect our business. In addition,
even if the regulations do not affect us directly, uncertainty over the scope of
the regulations could make financial institutions unwilling to share
consumer-related information with us.

     The Act does not prohibit state legislation or regulations that are more
restrictive on our collection and use of data. More restrictive legislation or
regulations have been introduced in the past and could be introduced in the
future in Congress and the states. For example, in the past legislation has been
proposed which would require consumers to opt in to any plan which would allow
their nonpublic personal information to be disclosed. We are unable to predict
whether more restrictive legislation or regulations will be adopted in the
future. Any future legislation or regulations could have a negative impact on
our business.

     We face intense competition in all areas of our business, and if we do not
compete effectively, our business will be harmed.

     We face intense competition from a number of companies. Further, we expect
that competition will intensify as the e-commerce and Internet markets continue
to develop and expand. Many of our competitors have significantly greater
financial, technical and marketing resources, greater name recognition and a
larger installed customer base than we do.

                                       24
<PAGE>

     In the electronic payment management market, our principal competitors
include:

     o    third party network and credit card processors, including First Data,
          Equifax, Total System Services, Electronic Data Systems, Concord EFS
          and Alliance Data Systems;

     o    financial institutions that have developed internal processing
          capabilities or services similar to ours, including Bank of America,
          Marshall and Illsley and Fifth Third National Bank;

     o    electronic data interchange and cash management providers, including
          Fiserv, CheckFree, EDS and Fundtech;

     o    electronic bill payment providers, including CheckFree, EDS,
          MasterCard, Spectrum and Visa;

     o    electronic funds transfer software providers, including Transaction
          Systems Architects, SLMsoft, Oasis, Mosaic and PaySys; and

     o    national information database companies and other content providers,
          including Equifax, Experian and Trans Union.

     In the market for electronic transaction processing, the principal factors
on which we compete are price and service levels. The future growth of our
revenues in this market is dependent upon securing an increasing volume of
transactions. If we cannot control our transaction processing expenses, we may
not remain price competitive and our revenues will be adversely affected. One of
the larger customers of our electronic transaction processing business, the STAR
Network, is likely to be purchased by Concord EFS. Although we have a long-term
processing contract with STAR, we cannot presently predict the possible impact
of this acquisition on our business with certainty. The loss of STAR as a
processing customer would have an adverse effect on our business.

     Competition for our decision support and risk management products is based
primarily on the quantity and quality of the data available to us for this
purpose and, to a somewhat lesser degree, price. Our competitive position in
these markets could be harmed if our competitors were able to compile different
data sources and analytical capabilities that proved to be more effective than
our products. In addition, competitive pressure on our check verification
business is increasing and may require us to make significant investments to
maintain our customer base and acquire new customers.

     In the fragmented information technology professional services market, we
compete with numerous firms. We believe that our principal competition to date
has been the internal information technology departments of current and
potential clients. In addition, we compete with systems consulting and
integration firms, application software firms, Internet professional service
companies, services divisions of computer hardware and software vendors,
facilities management and outsourcing companies, "Big 5" accounting firms and
strategic consulting firms. Competition in this area is primarily based on the
continued availability of qualified technical personnel in an extremely
competitive U.S. labor market. Our professional services business will suffer if
we are unable to attract and retain personnel with the advanced technology
skills we require.

     In addition to our current competitors, we expect substantial competition
from established and new companies as the e-commerce and Internet markets
continue to develop and expand. We cannot assure you that we will be able to
compete effectively against current and future competitors. Increased
competition could result in price reductions, reduced gross margins or loss of
market share.

     We are dependent on Deluxe for both business support and a significant
portion of our revenue.

     Deluxe provides us with tax, employee benefits, accounting, treasury, and
sales services. If Deluxe fails to perform these services adequately or
effectively, our business could be adversely affected. In addition, we will
continue to derive a substantial portion of our revenues from Deluxe in future
periods. In 1999, net sales to Deluxe

                                       25
<PAGE>

represented 3% of our total net sales and 43% of the net sales of our
professional services segment. During the first nine months of 2000, Deluxe
represented 14.4% of our total net sales and 80.5% of the net sales of our
professional services segment. Deluxe has established minimum spending targets
of $43 million per year through March 31, 2005 for software development,
maintenance and support services from our professional services business. We
will also provide Deluxe with business process outsourcing services during this
period. The loss of Deluxe as a customer or a material reduction in the amount
of services it orders from us would materially adversely affect our future
results of operations and financial condition.

     Our future profitability is dependent upon the continued growth in the
market for electronic debit payment services.

     If the electronic debit payments market does not grow or grows more slowly
than expected, our business will suffer. Several factors could inhibit the
acceptance and growth of electronic debit payments, including:

     o    these types of payments are relatively new alternatives to the more
          familiar cash, check and credit card payment options. Consumers and
          businesses may be unwilling to change their established payment
          preferences and adopt these new forms of payment as quickly as we
          expect; and

     o    consumers may be concerned that these newer payment options are not as
          safe or reliable as more traditional payment methods. Consumers may
          also believe that these payment technologies offer a lower level of
          privacy.

     The success of our strategy to expand our Internet delivery channels
depends on product development efforts and increased adoption by businesses and
consumers of the Internet as a means for commerce.

         We believe that the Internet will become an increasingly important
means by which consumers and businesses buy and sell products and services.
Accordingly, developing the means to process debit-based Internet transactions
is an important factor in our ability to increase sales of our electronic
payment services. In order to be successful with this initiative, we must
develop efficient ways for participants in Internet-based transactions to send
and receive debit payments with a minimum level of risk or inconvenience. Our
products for Internet applications are currently in development and we cannot
assure you that we can complete the development of these products or that our
Internet applications will be accepted in the market. In addition, the success
of our Internet strategy depends on the continued growth and use of the Internet
as a means of commerce. If commerce over the Internet does not become more
accepted and widespread, our business and results of operations could suffer.

     Factors that may affect Internet commerce adoption include:

     o    inadequate network infrastructure;

     o    security, privacy and authentication concerns;

     o    changes in, or insufficient availability of, telecommunication
          services to support the Internet; and

     o    increased government regulations or taxation.

     We may be required to expend significant sums to protect our trademarks.

     In May 1999, we filed a trademark infringement lawsuit seeking to prevent
Citizens Advisers, Inc. from using the "E FUND" mark and efund.com Internet
domain. This action and any future litigation could be costly and time
consuming. If we are unsuccessful in preventing Citizens from using our name for
confusingly similar products, our business could be harmed because customers and
potential customers are confused about the origin of goods and services offered
by Citizens and ourselves and wrongfully attribute any dissatisfaction with
Citizens' services to us. Further, if we are not successful in this lawsuit or
our current settlement discussions are not successful, we may not

                                       26
<PAGE>

be able to obtain a registered federal trademark for the eFunds mark, which
could restrict our ability to protect our name and reputation from infringement
by others.

     If the security of our databases is compromised, our reputation could
suffer and customers may not be willing to use our products and services.

     If the security of our databases is compromised, our business could be
materially adversely affected. In our electronic payments business, we collect
personal consumer data, such as names and addresses, social security numbers,
drivers license numbers, checking and savings account numbers and payment
history records. Unauthorized access to our database could result in the theft
or publication of personal confidential information and the deletion or
modification of personal records or otherwise cause interruptions in our
operations. These concerns about security are increased when we transmit
information over the Internet. A security or privacy breach may:

     o    deter customers from using our products and services;

     o    harm our reputation;

     o    expose us to liability;

     o    increase our operating expenses to remediate problems caused by the
          breach; and

     o    decrease market acceptance of electronic commerce transactions in
          general.

     If we experience system failures, the products and services we provide to
our customers could be delayed or interrupted, which would harm our business and
reputation and result in the loss of customers.

     Our ability to provide reliable service largely depends on the efficient
and uninterrupted operations of our computer network systems and data centers.
Any significant interruptions could severely harm our business and reputation
and result in a loss of customers. Our systems and operations could be exposed
to damage or interruption from fire, natural disaster, power loss,
telecommunications failure, unauthorized entry and computer viruses. Although we
have taken steps to prevent a system failure, we cannot be certain that our
measures will be successful and that we will not experience system failures.
Further, our property and business interruption insurance may not be adequate to
compensate us for all losses or failures that may occur.

     We may experience software defects, development delays and installation
difficulties, which would harm our business and reputation and expose us to
potential liability.

     Our services and products are based on sophisticated software and computing
systems and we often encounter delays when developing new products and services.
Further, the software underlying our products and services has occasionally
contained and may in the future contain undetected errors or defects when first
introduced or when new versions are released. In addition, we may experience
difficulties in installing or integrating our products and technologies on
platforms used by our customers or in new environments, such as the Internet.
Defects in our software products, errors or delays in the processing of
electronic transactions or other difficulties could result in:

     o    delay in market acceptance;

     o    additional development costs;

     o    diversion of technical and other resources;

     o    loss of customers;

                                       27
<PAGE>

     o    negative publicity; or

     o    exposure to liability claims.

     Although we attempt to limit our potential liability for warranty claims
through disclaimers and limitation-of-liability provisions in our license and
client agreements, we cannot be certain that these measures will be successful
in limiting our liability.

     Consolidation in the banking industry may adversely affect our ability to
sell our products and services.

     Mergers, acquisitions and personnel changes at financial institutions may
adversely affect our business, financial condition and results of operations. In
1999, the banking industry accounted for approximately 37% of our net sales.
Currently, the banking industry is undergoing large-scale consolidation, causing
the number of financial institutions to decline. This consolidation could cause
us to lose:

     o    current and potential customers;

     o    market share if the combined financial institution determines that it
          is more efficient to develop in-house products and services similar to
          ours or use our competitors' product and services; and

     o    revenue if the combined financial institution is able to negotiate a
          greater volume discount for, or discontinue the use of, our products
          and services.

     We depend on the continued services of our key officers.

     Our future success depends upon the continued services of a number of key
officers, including John Blanchard, our Chairman and Chief Executive Officer,
Paul Bristow, our Executive Vice President and Chief Financial Officer, and Dr.
Nikhil Sinha, our Executive Vice President for Global Corporate Development. The
loss of the technical knowledge and industry expertise of any of these officers
could seriously harm our business.

     Our attempts to expand by means of acquisitions and strategic alliances may
not be successful.

     Tax requirements related to the spin-off will restrict our ability to
complete significant acquisitions through the issuance of our common stock.
Further, our ability to expand in this manner involves many risks, including:

     o    the operations, technology and personnel of any acquired companies may
          be difficult to integrate;

     o    the allocation of resources to consummate these transactions may
          disrupt our business;

     o    acquired businesses may not achieve anticipated revenues, earnings or
          cash flow;

     o    strategic alliances may not be successful or we may not realize
          anticipated benefits in a timely manner, or at all; and

     o    our relationships with existing customers and business partners may be
          weakened or terminated as a result of these transactions.

     Our ATM deployment initiative may not be successful.

     In September, we entered into a new ATM deployment agreement with a limited
liability company in which we hold a 24% interest. Under this agreement, we have
assumed responsibility for ATM placement strategies and the expansion of the
limited liability company's former ATM base and the limited liability company is
responsible for

                                       28
<PAGE>

managing and servicing the ATM base in exchange for a monthly fee determined by
reference to the number of ATMs under management. Our revenues under this
contract are received from the fees paid by consumers utilizing the machines and
interchange fees paid by their banks. Although this contract is expected to
generate significant incremental revenue growth, if we are not successful in
deploying the ATM base in high volume locations, we will not generate sufficient
fee income to offset the costs associated with the management of the ATMs.
Currently, this business operates at a significantly lower than average margin
and this situation is expected to continue through the balance of 2000.
Improvement in future periods will depend upon our ability to efficiently manage
the deployment of the existing ATM base and the placement of new machines. This
is a relatively new business and so no assurance can be given that we will be
successful in these efforts. In addition, the expansion of the installed base of
ATMs may require the application of increased amounts of cash to keep the
machines appropriately supplied with cash for withdrawal by consumers.

     There are a number of risks associated with our international sales and
operations that could harm our business.

     Because we currently sell some of our products and services in Europe,
Australia and South and Latin America, our business is subject to risks
associated with doing business internationally. Also, we may not be successful
in selling our services outside of the United States. In 1999, we generated
approximately 6.7% of our net sales outside of the United States. Our future
results could be harmed by a variety of factors, including:

     o    changes in foreign currency exchange rates;

     o    changes in a specific country's or region's political and economic
          conditions, particularly in emerging markets;

     o    potentially unfavorable tax rules;

     o    tariffs, duties and other trade barriers;

     o    reduced protection for intellectual property rights;

     o    challenges in managing widespread operations;

     o    changes in foreign laws and regulatory requirements or in foreign
          policy; and

     o    varying business practices in foreign countries.

     Conditions in India could adversely affect our operations.

     We maintain software development and business process management facilities
in India with approximately 680 employees. Political and economic conditions in
India could adversely affect our operations.

     The Company's Indian software development and business process management
operations qualify for tax incentives associated with businesses which operate
within designated geographic locations. Such incentives generally provide us
with a complete exemption from Indian tax on business income generated from
these operations and phase out through the end of 2008. We cannot assure you
that these tax benefits will be continued in the future at their current levels
or at all. If these tax benefits were reduced or eliminated, our taxes in future
periods would likely increase.

     We face collection risks on some payments.

     A debt collection service we commenced in 2000 exposes us to collection
risks. For some clients of our check authorization service, we purchase returned
checks at a discounted price to the stated check amount and assume the

                                       29
<PAGE>

collection risk on the checks. We base our discounted purchase price on the
collection history of each client. If we are unable to collect on returned
checks at the historical rate of our clients or the payment quality of the
portfolio of returned checks deteriorates, we may incur a loss on the portfolio
of purchased checks. Although we may expand this service to additional
customers, we do not expect that revenues from our debt collection services will
exceed 5% of our total net sales in 2000.

     We face termination and compliance risks with respect to our government
contracts.

     All of our government contracts can be terminated at any time, without
cause, by the contracting governmental entity. We realized 16% of our net sales
in 1999 pursuant to contracts of this type. If a government contract is so
terminated, the contractor generally is entitled to receive compensation only
for the services provided or costs incurred at the time of termination and a
reasonable profit on the contract work performed prior to the date of
termination. In addition, all of our government contracts require us to comply
with various contract provisions and procurement regulations, and in some cases,
accounting requirements. Violations of some of these provisions could, if not
cured, result in termination of the contract and fines.

     Our government services business could be harmed by cost overruns on
fixed-price contracts.

     In 1999, approximately 16% of our net sales were derived from fixed-price,
variable volume contracts of our government services business. Under these
contracts, we agree to perform services for an agreed unit price and we bear the
entire risk of cost overruns and changing volumes. If we do not successfully
manage these project and contract risks or if our original contract estimates
turn out to be inaccurate, we could suffer cost overruns and penalties and our
reputation and results of operations could be harmed. We recorded charges of
$40.9 million and $8.7 million in 1998 and 1999 and we incurred an additional
net $9.7 million charge in the second quarter of 2000 as a result of these
risks. We cannot assure you that we will not incur additional charges of this
type or that the indemnification Deluxe has agreed to provide us with respect to
our existing contracts will be sufficient.

     We may be unable to protect our intellectual property rights.

     Despite our efforts to protect our intellectual property rights, third
parties may infringe or misappropriate our intellectual property rights, or
otherwise independently develop substantially equivalent products and services.
The loss of intellectual property protection or the inability to secure or
enforce intellectual property protection could harm our business and ability to
compete. We rely on a combination of trademark and copyright laws, trade secret
protection and confidentiality and license agreements to protect our trademarks,
software and know-how. We have also applied for patent protection on some of the
features of our newer products. We may be required to spend significant
resources to protect our trade secrets and monitor and police our intellectual
property rights.

     Third parties may assert infringement claims against us in the future. In
particular, there has been a substantial increase in the issuance of business
process patents for Internet-related business processes, which may have broad
implications for all participants in Internet commerce. Claims for infringement
of these patents are becoming an increasing source of litigation. If we become
subject to an infringement claim, we may be required to modify our products,
services and technologies or obtain a license to permit our continued use of
those rights. We may not be able to do either of these things in a timely manner
or upon reasonable terms and conditions. Failure to do so could seriously harm
our business and operating results. In addition, future litigation relating to
infringement claims could result in substantial costs to us and a diversion of
management resources. Adverse determinations in any litigation or proceeding
could also subject us to significant liabilities and could prevent us from using
some of our products, services or technologies.

                                       30
<PAGE>

                  Risks Relating to Our Separation From Deluxe


     We may not realize the benefits of our separation from Deluxe and our stock
price may decline if Deluxe does not complete the spin-off.

     If Deluxe does not complete the spin-off, Deluxe will continue to control
us and we may not fully realize the benefits we expect as a result of the
spin-off. Deluxe has the sole discretion to determine the timing and terms of
any spin-off and is not obligated to effect the spin-off. In particular, Deluxe
will not complete the spin-off unless it receives a confirmation from the
Internal Revenue Service to the effect that the spin-off would be tax-free to
Deluxe and its stockholders for federal income tax purposes. We cannot assure
you whether or when Deluxe will receive a favorable tax ruling from the IRS, or
that the spin-off will occur. In addition, if the spin-off is not completed, the
liquidity of our shares in the market will be limited unless and until Deluxe
elects to sell some of its significant ownership.

     We will be controlled by Deluxe as long as it owns a majority of our common
stock, and our other stockholders will be unable to affect the outcome of
stockholder voting during this time.

     As long as Deluxe continues to hold a majority of our outstanding stock,
Deluxe will be able to elect all of our directors and determine the outcome of
all corporate actions requiring stockholder approval. Because it controls us,
Deluxe has the power to act without taking the best interests of our company
into consideration. Deluxe currently owns approximately 87.9% of our outstanding
common stock. For purposes of meeting the tax requirements associated with the
spin-off, Deluxe also holds an option to purchase additional shares of our
capital stock so that it can maintain its ownership of at least 80.1% of our
outstanding voting power at all times prior to the spin-off.

     While it controls us, Deluxe will control decisions with respect to:

     o    the business direction and policies of our company, including the
          election and removal of directors;

     o    mergers or other business combinations involving us;

     o    the acquisition or disposition of assets by us;

     o    our financing; and

     o    amendments to our certificate of incorporation and bylaws.

     There are potential conflicts with Deluxe and four of our directors may
have conflicts of interest because they are also directors and officers of
Deluxe.

         Conflicts may arise between Deluxe and us as a result of our on-going
agreements. We may not be able to resolve any potential conflicts with Deluxe,
and even if we do, the resolution may be less favorable to us than if we were
dealing with an unaffiliated third party. In addition, during the period that
Deluxe controls us, John Blanchard, Lawrence Mosner, John LeFevre and Lois
Martin (or their successors), all of whom are members of our board of directors,
will continue to serve as directors and/or officers of Deluxe. These directors
will have obligations to us as well as Deluxe and may have conflicts of interest
with respect to matters potentially or actually involving or affecting us.
Matters that could give rise to conflicts include among other things:

     o    our past and ongoing relationships with Deluxe, including tax matters,
          employee benefits, indemnification, data sharing, and other matters
          arising from our separation from Deluxe;

     o    the nature, quality and pricing of transitional services Deluxe has
          agreed to provide us;

                                       31
<PAGE>

     o    the quality and pricing of services we have agreed to provide to
          Deluxe; and

     o    sales or distributions by Deluxe of all or part of its ownership
          interest in us.

     For example, by virtue of its controlling beneficial ownership and the
terms of the tax-sharing agreement between us and Deluxe, Deluxe will
effectively control all of our tax decisions until the spin-off is completed.
Under the tax-sharing agreement, Deluxe generally has sole authority to respond
to and conduct all tax proceedings and tax audits relating to our operations
during this period and to file all related returns on our behalf. The tax
sharing agreement also determines the amount of our liability to, or entitlement
to payment from, Deluxe with regard to taxes and tax refunds. This arrangement
may result in conflicts between us and Deluxe. Under the tax-sharing agreement,
Deluxe may choose to contest, compromise or settle any adjustment or deficiency
proposed by the relevant taxing authority in a manner that may be beneficial to
Deluxe and detrimental to us.

     Our historical financial information may not necessarily reflect our
results as a separate company.

     We have only a very limited operating history as an independent company.
The historical financial information we have included in this Quarterly Report
on Form 10-Q has been carved out from Deluxe's consolidated financial statements
and may not necessarily reflect what our results of operations, financial
condition and cash flows would have been had we been a separate, stand-alone
entity during the periods presented. As a result of our initial public offering,
we are now required to provide our own financial, administrative and other
resources to operate as an independent public company and to replace other
services provided by Deluxe to us. As a result, the historical financial
information is not necessarily indicative of what our results of operations,
financial condition and cash flows will be in the future.


   Risks Relating to the Securities Markets and Ownership of Our Common Stock

     We cannot predict the impact of the spin-off on the price of our common
stock.

     We cannot predict the effect that the spin-off will have on the market
price of our common stock. The spin-off will involve the distribution of
40,000,000 shares of our common stock, or 87.9% of our common stock, by Deluxe
to its stockholders. Substantially all of these shares would be eligible for
immediate resale in the public markets. Sales of substantial amounts of our
common stock in the public market, or the perception that substantial sales
might occur, whether as a result of this distribution or otherwise, could cause
the market price of our stock to decrease significantly.

     There may be limited liquidity in our shares.

     Prior to the split-off, Deluxe will hold 87.9% of our outstanding shares,
which may operate to limit the trading market for our shares, decreasing the
liquidity of our third party shareholders and possibly increasing the volatility
of our share price. If the spin-off is delayed or not completed at all, this
illiquidity and volatility could continue for an indefinite period.

     There are tax risks associated with the Spin-off.

     Deluxe has requested confirmation from the Internal Revenue Service that,
for U.S. federal income tax purposes, the spin-off will be generally tax-free to
Deluxe and to its shareholders. This confirmation, if received, will be premised
on a number of representations and undertakings made by eFunds and Deluxe to the
Internal Revenue Service, including representations with respect to each
company's intention not to engage in certain transactions in the future. The
spin-off may be held to be taxable to Deluxe and to its shareholders who receive
eFunds shares if the Internal Revenue Service determines that any of the
representations made are incorrect or untrue in any respect, or if any
undertakings made are not complied with. If Deluxe completes the spin-off and
notwithstanding such confirmation, the spin-off is held to be taxable, both
Deluxe and its shareholders who receive

                                       32
<PAGE>

eFunds shares could be subject to a material amount of taxes. eFunds will be
liable to Deluxe for any such taxes incurred by Deluxe to the extent such taxes
are attributable to specific actions or failures to act by eFunds, or to
specific transactions involving eFunds following the spin-off. In addition,
eFunds will be liable to Deluxe for a portion of any taxes incurred by Deluxe if
the spin-off fails to qualify a tax-free as a result of a retroactive change of
law or other reasons unrelated to the action or inaction of either eFunds or
Deluxe.

     Tax limitations on issuance of our shares will restrict our ability to
undertake acquisitions.

     The Company may be limited in the amount of shares that it can issue
because the issuance of the Company's shares may cause the planned spin-off to
be taxable to Deluxe under Section 355(e) of the Internal Revenue Code. As a
result of such possible adverse tax consequences, following the spin-off, the
Company may be restricted in its ability to effect certain acquisitions or to
enter into other transactions that would result in a change of control of the
Company.

     Provisions in our charter documents and Delaware law and tax considerations
related to the spin-off may delay or prevent a change in control.

     Provisions of our certificate of incorporation and bylaws and Delaware law
may delay or prevent a change in control of our company that you may consider
favorable. These provisions include the following:

     o    no cumulative voting by stockholders for directors;

     o    a classified board of directors with three-year staggered terms;

     o    the ability of our board to set the size of the board of directors, to
          create new directorships and to fill vacancies;

     o    the ability of our board to issue preferred stock, without stockholder
          approval, with rights and preferences that may be superior to our
          common stock;

     o    the ability of our board to amend the bylaws;

     o    a prohibition of stockholder action by written consent;

     o    advance notice requirements for stockholder proposals and for
          nominating candidates to our board;

     o    restrictions under Delaware law on mergers and other business
          combinations between us and any holder of 15% or more of our
          outstanding common stock; and

     o    a requirement that 66-2/3% of our stockholders and 66-2/3% of our
          directors approve certain corporate transactions, including mergers
          and consolidations, sales of assets or amendments to our certificate
          of incorporation.

     In addition we have adopted a stockholder rights plan which discourages the
unauthorized acquisition of 15% or more of our common stock or an unauthorized
exchange or tender offer. Our tax sharing agreement with Deluxe also provides
that we will indemnify Deluxe for any taxes due if the spin-off or some of the
related transactions fail to qualify as tax-free because of our actions or
inactions. An acquisition of us by a third party could have such an effect. As a
result, these tax considerations may delay or prevent a third party from
acquiring us in a transaction you may otherwise have considered favorable or
reduce the amount you receive as part of the transaction. We also have agreed to
indemnify Deluxe for a portion of any taxes due from Deluxe if the spin-off or
some of the related transactions fail to qualify as tax-free as a result of a
retroactive change of law or other reason unrelated to the action or inaction of
either us or Deluxe.

                                       33
<PAGE>

2001 Annual Shareholders' Meeting
---------------------------------

     The Company has not yet set a date for its 2001 Annual Meeting of
Shareholders, but under the Company's bylaws, the Company's Board of Directors
may exclude proposals (including director nominations) from consideration at its
2001 Annual Shareholders' meeting if such proposals are not submitted at least a
reasonable time before the Company begins to print and mail its proxy materials
for the meeting (the date of such preparation and mailing being herein referred
to as the "Mailing Date"). In addition, the proxies solicited by the Company's
Board of Directors may confer discretionary authority upon the persons named
therein to vote upon any matter submitted for consideration at the meeting
(without discussion of the matter in the Company's proxy statement) if the
Company does not receive proper notice of such matter a reasonable time before
the Mailing Date. It is expected that the 2001 annual meeting will occur in
mid-April 2001 and so proposals received after mid-November 2000 will likely be
considered untimely for consideration at the meeting.

                                       34
<PAGE>

Item 6.  Exhibits and Reports on Form 8-K
-----------------------------------------

(a)      The following exhibits are filed as part of this report:

<TABLE>
<CAPTION>
         Exhibit No.                               Description                                    Method of Filing
         -----------                               -----------                                    ----------------
         <S>               <C>                                                                    <C>

             2.1           Initial Public Offering and Distribution Agreement, dated                   *
                           as of March 31, 2000, by and between Deluxe and eFunds
                           (incorporated by reference to Exhibit 2.1 to the
                           Registration Statement on Form S-1 (the "S-1")
                           filed by the Company with the Securities and
                           Exchange Commission (the "Commission") on April
                           4,2000, Registration No. 333-33992).

             3.1           Amended and Restated Certificate of Incorporation                           *
                           (incorporated by reference to Exhibit 3.1 to the S-1)

             3.2           Bylaws (incorporated by reference to Exhibit 3.2 to the S-1)                *

             4.1           Form of common stock certificate (incorporated by reference                 *
                           to Exhibit 4.1 to Amendment No. 1 to the S-1 filed by the
                           Company with the Commission on May 15, 2000 ("Amendment No.
                           1") , Registration No. 333-33992)

             4.2           Form of Rights Agreement by and between the Company and                     *
                           Rights Agent, (incorporated by reference to Exhibit 4.2 to
                           Amendment No. 1)

             4.3           Certificate of Designations of Series A Participating                       *
                           Preferred Stock (incorporated by reference to Exhibit 4.3
                           to the Company's Quarterly Report on Form 10-Q for the
                           quarter ended June 30, 2000

            10.24          Continuing Guaranty and Deposit Account Security Agreement           Filed herewith
                           dated as of September 29, 2000 between the Company and Bank
                           of America, N.A.

            10.25          Letter Agreement dated September 20, 2000, by and between            Filed herewith
                           the Company and Access Cash International, LLC

            27.1           Financial Data Schedule for the quarter ended September 30,          Filed herewith
                           2000
</TABLE>

      ----------------------
      *Incorporated by reference


      (b)  Reports on Form 8-K:  None

                                       35
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                              eFUNDS CORPORATION


(Registrant)


Date:  November 7, 2000                       /s/ J. A. Blanchard III
                                              ----------------------------------
                                              J. A. Blanchard III,
                                              Chief Executive Officer
                                              (Principal Executive Officer)


Date:  November 7, 2000                       /s/ Paul H. Bristow
                                              ----------------------------------
                                              Paul H. Bristow
                                              Executive Vice President and
                                              Chief Financial Officer
                                              (Principal Financial Officer)

                                       36
<PAGE>

                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>

Exhibit No.                               Description                               Page No.
-----------                               -----------                               --------
<S>            <C>                                                                  <C>

   10.24       Continuing Guaranty and Deposit Account Security Agreement dated
               as of September 29, 2000 between the Company and Bank of America,
               N.A.

   10.25       Letter Agreement dated September 20, 2000, by and between the
               Company and Access Cash International, LLC

   27.1        Financial Data Schedule for the quarter ended September 30, 2000
</TABLE>

                                       37